As a home loan borrower, personalised solutions are often as important as competitive rates and terms. Often, you may like to reassess if your current home loan terms are in line with market offerings, or if you could avail of a better proposition.
A home loan balance transfer is a solution that allows you to transfer the balance amount on your current home loan to a new lender – who may, in turn, be willing to offer a more competitive interest rate with other favourable terms.
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Thursday 09 Jan. 2025
Let us explore how a home loan balance transfer works, and if you should consider one.
What is a Home Loan Balance Transfer?
A home loan balance transfer is the process of transferring your existing loan balance to another lender to benefit from a lower interest rate, revised repayment tenor, or better customer services and facilities. This facility can help you save on the overall cost of borrowing – depending on when you avail of a balance transfer and the difference between your current and future interest rate, considering other applicable fees and charges.
Why Should You Opt for a Home Loan Balance Transfer?
Here are some of the benefits of availing of a home loan balance transfer:
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Lower Interest Rates:
One of the primary advantages of opting for a home loan balance transfer is the benefit of possibly securing a lower interest rate compared to the current rate, depending on your profile and eligibility. This can help you maximise savings over the course of your loan tenor, making EMIs more manageable.
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Access to a Top-up Loan:
When you opt for a home loan balance transfer, you may get a chance to avail of a top-up loan. This is an additional loan taken over and above the existing home loan amount. A top-up loan comes with end-use flexibility, which means you can use the funds to meet various housing-related expenses. Moreover, this amount comes at a nominal interest rate, which is often much lower than the interest rate applicable for other unsecured loans, such as a personal loan.
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Improved Customer Service and Facilities:
You can also opt for a home loan balance transfer for improved customer service, such as online account management, and opt for value-added services as well.
Eligibility Criteria for a Home Loan Balance Transfer
Before initiating a balance transfer, it is essential to ensure you meet the home loan eligibility criteria determined by your new lender. Typically, lenders assess you based on the following factors:
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Nationality:
Most lenders offer finance for Indian citizens. For NRIs, lenders usually extend finance for salaried individuals even if they do not reside in the country.
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Age:
Applicants must fall within the permissible age bracket, which is usually between 21 and 65 years of age with the upper age limit considered as the age at the time of loan maturity.
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Employment Status:
Salaried, professional, or self-employed individuals with stable income sources are preferred.
It is advisable to use online tools such as a home loan eligibility calculator to estimate the loan amount you can be eligible to borrow.
What is the Right Time to Opt for a Balance Transfer?
The right time to opt for a home loan balance transfer is when the benefits outweigh the costs involved. You can consider a balance transfer during the initial period of the loan tenor, as during this period, your EMI largely comprises the interest component.
Transferring your loan to a lower interest rate during this period can help you maximise savings. Evaluating associated costs, such as the balance transfer fee, helps you calculate the overall savings to justify the switch.
