Are you paying high interest and EMI for your home loan than the standard market rates? In such a case you must consider transferring your home loan to another lender with a low-interest rate. Home loans are long-term loans which go up to 30 years. More than half of a home loan EMI is the interest you pay to your lender.
When you apply for a home loan balance transfer, the new lender will pay the loan balance to your current lender in full and you start paying the EMIs to your new lender.
Here are a few things you must consider before you transfer your home loan to a new lender.
1. You must only switch if and when the interest rate that you are paying is higher than current market rates. In such a case, the transfer will help you lower the EMIs.
2. You must compare the rate difference before you do a home loan balance transfer as home loans are based on the marginal cost of based lending rate (MCLR). But the non-banking companies do not follow MCLR and their home loans are based on market standards.
3. It is not recommended that you switch your home loan if you are closer to the end of their tenure. And also, not if you have plans to sell your house.
4. Banks and NBFCs also charge processing fees while getting a home loan transferred, which you may have to pay to your new lender. Usually, the processing fee is one percent of the outstanding loan amount.
5. The process of transferring a home loan generally takes around 15 to 20 days and your new lender might also offer you a top up loan on your home loan. Make sure that you apply for the additional amount only if you need it and if the lender offers you a better deal.
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