In the last couple of years, a new strategy has become a buzzword among existing Home Loan subscribers. With the onset of Home Loan balance transfer, a major percentage of existing Home Loan subscribers are opting for the facility to obtain lucrative benefits. As the matter stands, Home Loan balance transfer allows a borrower to switch his/her existing debt from one lender to another by carrying out the due process. This move enables the borrower to attain monetary benefits from the interest rate difference between the former and latter options.
The overall idea seems alluring but only if planned properly. There are three factors which must be considered for self-evaluation before applying for Home Loan balance transfer.
1. The Interest Difference: You can attain benefits from Home Loan balance transfer only if the new lender is offering a lower interest rate than the former one. Hence, to make your decision worthwhile, make sure the interest rate differs by a profitable margin.
2. Can your Lender Reduce the Interest Rate: Before opting for the balance transfer, you must consult your existing lender and see if they can reduce the interest rate. If they do, it will save you a lot of money, time and efforts.
3. The Time of Switch: In a traditional Home Loan, a higher percentage of the EMIs paid in the initial years are used to settle the interest part first and then the principal debt. Therefore, if you apply for the switch towards the end, most of the interest is already paid and you hardly get any benefits. Hence, it is advisable to opt for Home Loan balance transfer at the earliest.
Also Read: All You Need to Know About Home Loan Transfer
Bottom Line: If you think you can leverage the benefits of the Home Loan balance transfer facility, assess your debt and then proceed further.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.