Facts to Review While Doing Home Loan Transfer to Another Lender
In response to RBI’s decision to cut down the repo rate multiple times throughout the on-going fiscal, the rate of interest associated with home loans is likely to reach its all-time low in over a decade. Such a decision has been welcomed by both intending and existing home loan borrowers equally.
For instance, new applicants now have the opportunity to secure a home loan at a lower interest rate. On the other hand, existing borrowers can use this chance to lower their current financial burden through home loan transfer.
However, before one opts for such an option, they need to review a few things to make an informed decision.
Things to Consider Before Proceeding With a Balance Transfer
Here is a list of some of the most important factors besides the rate of interest for borrowers to review.
Individuals should only consider transferring their home loan if their lender is charging them a higher rate of interest than the current market rates. Also, if they are dissatisfied with the services of the current lender, they may consider it.
- Credit score
The credit score plays an important role when it comes to home loan transfer. For instance, if an individual’s credit score has fallen after availing the home loan, it may hamper the chances of availing the transfer successfully. Therefore, it is important to maintain a high score and if possible, increase it beyond 750 to get qualified for a loan transfer. Additionally, borrowers must make it a point to repay their debt instalments on time to improve their credit score further.
Individuals should refrain from switching their lender if they are close to the end of their tenor. Typically, a longer repayment period allows borrowers to benefit from the reduced rate of interest and make up for the processing charges incurred during the home loan transfer.
However, when the remaining tenor is less than 5 years, a balance transfer will only add to more expenses and will defeat the entire purpose of interest savings. This is so because the interesting part is much higher in the initial stages of EMI payments. As the tenor proceeds, the principal increases while the interest component decreases in the monthly instalments.
Hence, transferring a housing loan during the last few months or years of repayment will not enable the borrower to save substantially.
- Top-up loan
Individuals should check if the lender they wish to switch with offers the benefit of top-up loan or not. Choosing an HFC who extends such additional credit facility will help borrowers to fulfil urgent financial needs at a lower rate of interest among other benefits.
- Additional charges
Besides interest rates, borrowers who wish to opt for the home loan transfer facility must also factor in the secure a home loan charges that are associated with it. They should calculate the charges they will have to pay to their current lender while applying for a balance transfer.
Furthermore, they should also consider the processing fee charged by the new lender. Needless to say, the best bargain would be where you have to pay a negligible amount of money as a processing fee.
Borrowers must proceed with the balance transfer of their home loan only post reviewing the above-mentioned points.
- Loan eligibility
Borrowers should also make it a point to review the secure a home loan eligibility that is followed by their new choice of lender. This will prove quite useful in a situation when they intend to take out a new loan to meet their financial requirement.
The best way to calculate the same is by using a reliable online loan eligibility calculator. It will further help them streamline the process accordingly.
Being a high-value credit option, documents and their verification plays a huge role throughout the process of both availing a loan and transferring it. It is because the new lender uses documents pertaining to the property as collateral until the loan is paid off. Borrowers will also have to submit their existing loan, KYC, and additional documents.
Resultantly, they must gather all the crucial documents from their current lender to streamline the process of home loan refinances.
Other than these, borrowers should also consider all the associated benefits of choosing a home loan balance transfer from a particular lending institution before initiating the process.
Therefore, factors like credit score, remaining tenor, top-up loan, documentation and additional charges must be factored in before going ahead with home loan transfer. Borrowers must also check in with their choice of the new lender if they match the eligibility criteria or not.