Consequently, repayment difficulties, plus reductions in home loan rates as seen now, prompt many borrowers to seek refinancing. However, individuals need to time their home loan transfer depending on the following factors to ensure optimum savings.
Changes in financial position: Unprecedented circumstances leading to an increase or decrease in income is very common. Borrowers can choose balance transfer if their current lender is unwilling to adjust the home loan EMI terms to facilitate ease of repayment.
Lower interest rates: One of the most prominent reasons for individuals to choose housing loan refinancing is a decrease in interest rates. Several financial institutions refuse to lower the floating interest rates of existing loans upon a repo rate cut. In such cases, borrowers can switch to a lender offering lower rates. A loan transfer can also be helpful if you are willing to switch from high fixed rates to lower floating rates.
High outstanding and tenor: Interest component of home loan EMI decreases over time, with each EMI payment. Thus, seeking home loan transfer is a wise option only during the early years, preferably the first quarter of your tenor, since it ensures maximum interest savings.
Note that irregular EMI payment history with your current lender can lead to poor home loan eligibility and might deter a refinancer from approving your application.
Also, make sure the total cost of refinancing, including processing fees, transfer charges, valuation fee, etc., does not exceed your anticipated interest savings. Stay updated with the latest regimes for home loan tax benefits to enhance the interest savings availed through a balance transfer.
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