A Home Loan Balance Transfer is the process of switching from one lending institution to the other for the transfer of the outstanding value of the loan. The main intention borrowers have when they opt for this process is to take advantage of the lower rates of interest offered by the new lender. Moreover, borrowers can also look forward to better financial services such as enhanced customer service and Top Up Loans.
As of now, lending institutions, viz. banks and Non-Banking Financial Companies (NBFCs) use the MCLR to determine the base rate for providing Home Loans. To top it, lending rates have seen a decline over the recent years, thanks to demonetization and government policies like PMAY and RERA. In case the existing lender is providing the loan at a higher rate of interest for an individual, he/she can choose to approach a different bank or NBFC to transfer the Home Loan account and avail the loan at a lower rate of interest. As long as the individual is eligible for the loan from the new lender and has been making regular (EMI) payments to the existing lender, a balance transfer is very easy.
Listed below are the benefits of opting for a balance transfer:
The first benefit will always be lower interest expenses- with frequent repo rate cuts, a borrower can switch lenders and have sizeable savings on the interest on the Home Loan.
Next comes the option of a Top Up Loan. As the costs of purchasing a home can sometimes go beyond the estimated budget, covering the additional costs becomes challenging when the existing lender does not provide a top up loan. In scenarios like these, the borrower can switch to a lender who provides such top up loans.
There are several other benefits of opting for a Home Loan balance transfer and the same can be read from here: Know the Right Time To Transfer your Home Loan
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.