Things to ponder on home loan balance transfer!

To seek respite from high EMIs, many people opt for home loan balance transfer. This involves transferring your loan from one bank to another. This is done to avail lower interest rates, better tenures and other beneficial services. However, there are a few mistakes you’d like to stay away from while transferring your home loan, so that you’re able to maximize your savings.

Before you decide to transfer your home loan, it is very important to check how much time or tenure remains of your home loan. If your home loan has begun only a few years ago, which means you still have considerable tenure left, along with a high interest rate, a loan transfer would be a wise option. That is because, during the initial days of loan repayment, most of your EMI goes towards interest payment. Hence, even a small reduction in interest rates can help you save a lot of interest in the long run.

On the other hand, if your home loan is very old, only has a few years to go and your outstanding amount is not more than 5-10% of the total loan, then it makes little sense to transfer the loan. This is because towards the end, the majority of your EMI is directed towards repaying the principal amount. That is why it is possible that despite adjusting for loan transfer, you might not benefit at all.

While transferring their home loan from one bank to another, most individuals only check for reduction in interest rates. But, there are certain charges that you also have to pay while transferring the loan. That is why, don’t forget to focus on aspects such as savings from loan transfer, loan tenure and balance transfer charges. Just like your old bank, the new bank will also charge processing, legal and valuation charges. So, make sure you add up all these costs as well, and then check if the transfer is beneficial or not.

Before opting for balance transfer, double check the tenure of your home loan. This is extremely crucial. If, due to a longer loan tenure, your EMI amount is low, it means that you’ll end up paying higher in interests. Even though a longer tenure implies lower EMI, you’ll have to pay more money in interest. So, don’t extend your loan tenure in a bid to reduce your EMIs.

All banks have different terms and conditions. Hence, to whichever bank, NBFC or housing finance company you are transferring your loan to, read their terms carefully. Some terms can be tricky. Check all about the bank’s services, so that you don’t have to visit the bank for everything. Low interest rates should not be the sole parameter for changing banks.

If you’re thinking of a home loan balance transfer, start by talking to your old bank. Sometimes, in a bid to not lose customers, the bank might give you a counter offer. This can save you from the hassles involved in home loan transfer. If the bank does not agree, there’s always the option of loan transfer. In this case, talk to at least 5-6 banks to get the best deal. In the end, only seek to transfer your home loan if your total savings exceed the loan’s transfer costs.