A home loan is a long-term liability and requires a lot of financial planning. It is important to have a steady income to pay off the monthly instalments of the loan. However, many people do not realise that they can save a lot of money on their home loan plans. This is because they think that once they have taken a loan plan, they are stuck with it. This is not true at all. If you have already taken a home loan plan but happen to find another plan that seems like a better option, it is possible to opt for a home loan balance transfer.
This transfer involves the transfer of the remaining amount of the existing housing loan to a new loan plan offered by another financial institution. Here are few aspects to keep in mind that can help you save a significant amount of money while opting for the transfer:
- Make sure to have a majority of the repayment tenure left
Before going for a home loan transfer, it is advisable to make sure that there is a majority of the repayment tenure still left. This is because if most of the loan amount is repaid, the transfer might not make much of a difference. The cost of the transfer itself might be more than the amount you end up saving.
- Consider the difference in the interest rate
One of the biggest reasons why borrowers opt for home loan transfers is getting better interest rates. This is quite understandable, as even a slight difference in the interest rate of a loan can result in a significant change in the total cost of the monthly instalments. This is why you should make sure that the new lender is offering a home loan balance transfer interest rate that eases the repayment.
- Check if the lender is charging additional fees
While transferring the home loan balance, it is important to calculate the cost of doing so. While opting for a home loan transfer, many people only focus on the difference in the interest rate. However, you also need to check whether the new lender is adding processing fees and other charges for transferring the loan. This will add to the cost of a loan transfer, hence, you should choose this option only after ensuring that you are saving money after these expenses.
If a small amount is left to be paid, a home loan transfer might not result in much savings. However, if the outstanding amount is high, the new interest rate applied to it can make a significant saving. Make sure to use a home loan balance transfer EMI calculator to ensure that you are satisfied with the new monthly instalments. Lastly, to ensure a smooth process, always check with the new lender regarding the documents required for home loan balance transfer. This way, you can be prepared and go through with a hassle-free procedure of transferring the loan.