When a borrower has an active home loan, EMIs of such credit are categorised under regular liabilities. Due to its long-term repayment, home loan refinancing is an option, which many borrowers tend to explore. A home loan balance transfer can reduce one’s liabilities effectively by reducing the amount of interest charged on the outstanding principal amount.
What does a home loan balance transfer mean?
The home loan balance transfer involves transferring one’s current home loan principal outstanding to a new lender, charging a restricted interest rate. This helps a borrower to save efficiently and manage monthly expenses smoothly.
Moreover, this facility comes with a top up loan facility. It ensures that existing housing loan borrowers are eligible to receive a substantial amount as an additional advance.
Factors to consider when opting for refinancing
Choose a lender offering low-interest rate
The foremost rule to a successful refinancing is comparing different market lenders. An individual must evaluate the interest rate offered by the various lending institution. This helps in decision-making and opting for the one levying a lower interest rate.
Find out the charges involved
An applicant must be aware of the fact that balance transferring of home loan account is not free. There are several charges linked with the process. Hence, an individual must assess and analyse the fees charged carefully. A borrower must shift his/her loan only when the interest rate payment becomes unbearable.
Determine the tenure left
Opting for a home loan balance transfer is useful when a significant portion of loan tenure remains. Shifting the balance when only 1-2 years of the period is left limits or nullifies any savings. The charges levied by a current lender would be relatively higher when compared to interest savings.
Keep in mind that, as per the amortisation schedule, financial institutions tend to charge the maximum interest during the first half of a loan’s repayment period.
Read Also: Tips to Consider before Applying For a Housing Loan
