Transferring your Home Loan- Things to remember

Posted by LoanAdda on May 2nd, 2018

Falling interest rates and poor sentiment in the property market has had an impact on the home purchase decisions. Customers who have the intent and capacity to purchase a home loan are getting some of the best rates and terms in the market.

However, what about the customers who have already availed a home loan in the past few years. Unfortunately, most of the attractive terms and rates are given to new customers only by the banks and existing customers continue to pay the old rates. If you are one such customer who is unable to reduce your rate of interest from your existing lender, you have some options available to ease your debt burden. You can opt for balance transfer of your home loan to another vendor, thereby getting better terms and rates.

It is essential to do a cost benefit analysis before opting for a balance transfer. Is your savings over the years going to outweigh the transfer cost that you would have to bear? If yes, then opting for a balance transfer is prudent. But if your outstanding amount is low or if you are planning to balance transfer towards the end of your loan tenure, then a balance transfer is not ideal considering that the costs would eliminate any savings incurred. The costs involved would be processing fees (depending on lender it can be waived for balance transfer), pre-payment penalty is nil and other negligible costs like stamp paper for transfer of loan etc.

Also, while opting for a balance transfer it is essential to remember that you would have to go through the entire process of home loan again. The new lender would ideally go through the same documentation process that you went through the first time around.

Before you opt for a balance transfer, approach your existing lender, if they are willing to reset your interest rate. Most banks renegotiate the rates to retain customers and this is where a superior service standard makes all the difference though unless you have a parallel sanction, your existing banker doesn’t reduce rates. Explore the option of a balance transfer but do your cost benefit analysis before opting for one.