If you have already taken out a home loan a few years back, it is quite natural to find current loan plans offering much better deals. Now, this does not mean that you have to miss out on better benefits! Financial institutions allow borrowers to refinance their home loans for improved terms and conditions. A home loan refinance is not necessarily done with the same lender; it is also possible to transfer the loan to a new lender, which is known as a home loan balance transfer.
Are you wondering whether refinancing your home loan is a good option? Well, that depends on numerous factors. Let’s take a look at them:
- Home loan balance transfer interest rate
A change in the interest rate is one of the most common reasons why borrowers opt to transfer their home loans. This is because even a slight drop in the housing loan interest rate can prove to be significant in helping bring down the overall cost of the loan. This will also help in bringing down the loan’s monthly instalments. This is why it is so important for you to make sure that the new lender is offering a competitive interest rate before refinancing your home loan.
- Outstanding amount left to be repaid
You might find a new lender that is offering much better terms as compared to your current deal. However, it might not make much sense to make the shift if the loan is almost fully repaid. If a major chunk of the loan amount has already been repaid, the new terms, whether it is a lower interest rate and/or a better repayment tenure might not make much of a difference in terms of your savings. This is why it is advisable to opt for a home loan balance transfer when a major part of the outstanding loan amount is left to be repaid.
- Savings made after transferring the loan
The primary goal of refinancing a home loan is to bring down the total cost of the loan. This is why it is essential to first calculate the amount being saved by refinancing the home loan. There are many financial institutions that make home loan balance transfer EMI calculators available on their websites. This tool can be used to find out about the potential savings after transferring the loan.
- Charges involved in the transfer
You should not just be looking at the revised interest rate but also calculate the charges involved in opting for a home loan balance transfer, such as the processing fee. This way, you will be aware of whether transferring the loan is a profitable move or not.
Now, after considering all these factors, you can decide whether to go ahead with the transfer. If the decision is to go ahead, make sure to check with your new lender about the documents required for home loan balance transfer.