Interest rates on home loans have been steadily rising over the past few months. Many homeowners are struggling to keep up with their monthly repayments as rates continue to rise. But there is a way to deal with rising rates and ease the financial pressure – by opting for a home loan balance transfer.
A home loan balance transfer, also known as home loan refinance, simply means switching your home loan from one lender to another. And it can be a great way to save money on interest, especially if you can find a lender who is offering less home loan interest rates than what you are currently paying. Read on to find out more benefits of home loan balance transfer and how it helps you financially.
Benefits of a home loan balance transfer
There are a number of benefits associated with opting for a home loan transfer.
- Lower interest rates: Ideally, a home loan transfer interest rate costs less. If you have been with your current lender for a while, chances are you are paying an older, higher interest rate. By switching to a new lender, you could immediately start paying a lower rate, which means more of your monthly repayments will go towards paying off the actual loan amount, rather than being spent on interest.
- Added flexibility: A home loan balance transfer can also give you some added flexibility. Many lenders tend to offer features such as redraw facilities and offset accounts when you take out a new home loan. These features can help you pay off your loan faster and save even more on interest costs.
- Consolidate your debts: A top-up on such balance transfers can also help you consolidate your debts. If you have a number of different debts – such as a personal loan, credit card debt or an investment loan – switching them all to your home loan can make life a lot simpler. Not only will you have just one monthly repayment to worry about, but you may also be able to get a lower interest rate on the combined debt.
- Good ROI: When you opt for a transfer, it is possible to negotiate the terms and conditions of your loan by citing your credit score, track record of payments, and other points. This will help you get a lower interest rate and other benefits.
Things to keep in mind when transferring your home loan balance
- Check if there are any prepayment penalties: Some lenders might charge a penalty if you repay your loan before the tenure is up. Make sure to check for this before transferring your loan.
- Search for competitive offers from different lenders: Use a home loan balance transfer calculator to compare offers from different lenders and choose the one that best suits your needs.
- Read the fine print: Read the terms and conditions of the new home loan balance transfer rates carefully before signing on the dotted line. Also, make sure you have all home loan transfer documents ready for the new loan.
With the current interest rate hike, the best way to deal with increasing interest rates is by transferring your home loan balance to another lender. This can help you save money in the long run and ensure that you don’t get stuck with a high interest rate.