Transfer of Home Loan Balance is financially good or bad for you?
Home loan in india
We all know that most of us prefer to take home loan to buy home, but when it comes to transfer of Home Loan Balance, so only few us know about these kinds of options. Home Loan Balance allows the browsers to get benefit from a downward movement in lending rates, however; lending rates change as per the market conditions. New Year is about to come and its perfect time to start something new and do some exciting shopping’s to celebrate New Year with new zeal and excitement. On September 29th 2015, Mr. Raghuram Rajan announced that RBI is cutting the rates and it will allow some of the banks to follow the same and lower their lending rates, so that loan browsers can get certain benefit. It is expected that this announcement will add some more cheer to the home loan market and it will attract the new buyers in the reality sector.
Like Mr. Sharma there are some buyers in market who already has a home loan which is at a higher rate and they are not getting any kind of benefit from these lower rates. But his one of the friend suggest that he should explore the option of home loan balance transfer as it will allow him to take the advantage of the lower rate regime.
What is Home Loan Balance Transfer?
Home Loan Balance Transfer is just options which allow you to get benefit from the downward movement in the lending rates as we all know that lending rates are subject to change as per market conditions. Sometimes floating interest rates can be much lower than the previous and it depends on the banks whether to transfer benefit or not, which means new home loans can be available at lower rates than previous. If you will opt for the Home Loan Balance Transfer option, so the entire principal amount of the loan will be transferred from your old or existing bank to a new bank and in that case if your old bank is not passing the benefit of lower interest rate, so you can avail that benefit with new bank, but before transferring home loan make sure that banks is ready to transfer the benefit of lower interest rate. However; as customer you will subsequently pays the EMIs to the new bank at the new rate.
You will get the benefit from Home Loan Balance Transfer or not?
Now the most crucial question; You will get the benefit from Home Loan Transfer or not? As procedure is complex, so there is no clear answer with “Yes” or “No” because Home Loan Transfer can be benefited with certain terms and conditions because in some cases even if bank is offering the lower interest rate, so it could not be the economically viable to transfer a home loan, if your savings are not enough to justify, effort, time and cost. However; in simple words there are some factors which can help you to get answer that decision of Home Loan Transfer of good for you or not?
- Amount of Outstanding Principal
- Total Cost of Home Loan Transfer
- Your Remaining Loan Tenure
- Time and Effort
Cost Involved in Home Loan Balance Transfer:
If you are wondering that how much money it takes in Home Loan Balance Transfer, so when you transfer a home loan the cost involved processing fee, pre-payment penalty and some other charges such as; stamp duty and more as per banking policies. However; most of the banks prefer to waive off the pre-payment penalty as RBI and NHB discourage banks from charging it but other charges are unavoidable. Apart from that the total savings can be determined after calculating the total cost which is involved. On the other side remaining home loan tenure is also another important factor and if there are less time in the loan tenure, so it might not be worth to put the effort for a home loan transfer. However; if the loan duration is long, so the cost can be adjusted in the form of savings with remaining loan duration else the cost burden will not be justified.
In certain cases it is obvious that if you have bigger outstanding principal so it is better to go with Home Loan Balance Transfer as you will be able to save more, but keep in mind that loan transfer such as; new home loan will also take a lot of time, documentation and other efforts and if you are professional so you can also measure these things in monetary terms. You will have to research which bank to transfer the loan to, liaison with your bank and the new bank, get documentation in place, and submit applications and much more.
Conclusion:
If you are thinking to take the benefit from Home Loan Balance Transfer, so before approaching another bank you must check that your existing bank is willing to reset the rate or not because there are some banks which prefer to negotiate. If the market conditions warrant that most banks would be willing to retain their customers and re-negotiate the loan rate. Even if your existing banks is offering little lower interest rate than previous and it is not much lower than the what competitor is offering, so transferring will not make much sense as it will involve processing fee, pre payment charges and a lot of time and effort.
It is recommended to explore the multiple options of a home loan transfer as it can be benefited for you in certain terms and conditions, however; before making the final decision you can also take the help of experts or you can do cost benefit analysis by yourself.
