Lower the EMI with balance transfer

Posted by Anurag Mishra on July 12th, 2017

After taking the home loan from a bank/lending institution, if one finds a lender offering same amount of money at a lower interest rate with better options, switching the lender is a wise decision. ‘A penny saved, is a penny earned’. The transfer of the existing loan account with the balance loan money from the present lending organization to another bank or financial institute is termed as home loan balance transfer. Before availing the transfer opportunity it is advisable to revise and compare the rates, terms and conditions of the existing and future lender thoroughly, so that the chance of repentance is nullified and the burden of EMI gets reduced.

When the EMI starts gobbling too much of the income, other critical financial goals get affected. The whole economic infrastructure works in such a way, as to provide more and more support to the common men. Savings is the only reason to migrate from one lender to other. The borrower needs to study and understand the market thoroughly before opting for the home loan balance transfer. The borrower should keep in mind the charges and incentives for the loan transfer so that the overall procedure doesn’t dig a hole in the borrowers’ pocket.

Home loan balance transfer comes with some salient features, like: when the borrower is migrating from the existing organization to another bank/lending institute, probability is there that the investing property value may rise. Some banks provide top-up loan up to RS.35 lakhs that may help the borrower to mitigate some immediate expenses. But it’s totally on the customers’ discretion to go for top-up loan or not. As expected the borrower would get attractive rate of interest. Customized repayment options are molded as per the need of the borrower. Some organizations have integrated branch network for availing and serving the loan anywhere in India.

Applying for a loan transfer re-invokes the new home loan procedure. Along with all generic documents required for a home loan; the loan sanction letter, present loan agreement documents, registration of the property papers and stamp duty payments with the existing lender, income proof, bank statement and IT Returns paper copies are required. Approval from both the existing and new lenders is required. A consent letter for switching the organization from the present lender is mandatory; the new lending organization will need it to cover the outstanding loan amount of the new borrower.

The borrowers are suggested to use the home loan calculator provided by the financial organizations to have a before hand knowledge of the EMI against the home loan. This prior idea will help the borrower to compare the amount and make the right decision of going for the home loan balance transfer or not. The existing financial organization may charge a prepayment penalty of about 2% on the balance amount for the fixed rate of interest loan account. Upto 0.5% processing fee is charged by the new organization.

One must keep in mind the remaining tenure of the loan term, because it is wiser to avoid balance transfer procedure if one has completed more than five years of the tenure. If it is so, then the borrower can go for the EMI reset option. If the customer is not in the defaulter list and is regular with the EMI payment, then on humanity ground the organizations may reduce one year from a 15 year tenure term, that, will eventually reduce the EMI cost. Again it depends on the organizations’ discretion.