Home loans are one of the most convenient and secure financing options that one can consider securing financial backing to purchase a residential unit. However, even though interest rates for home loans are lower compared to unsecured credits, repayment can still put a substantial financial strain on one’s budget.
In such cases, one can follow certain steps to reduce the repayment burden of their home loan. One of the ways a borrower can consider is negotiating with their current lender to reduce the interest rate. He or she can also transfer home loan balance to another lender offering the credit at an affordable interest rate.
Nonetheless, an individual should take into account the following tips before opting for home loan balance transfer –
● Check for processing fees and other additional charges – Before opting for a home loan, one should consider the various charges that he or she is liable to pay while transferring their home loan balance to a new lender. If the charges incurred are substantial, one should either consider staying with their original lender or look for another lending institution who charges a nominal processing fee. Consider switching only after analysing the cost-effectiveness.
● Know the proper time to transfer your home loan balance – Consider transferring your home loan balance to a new lender during the initial stages of loan tenor. It is not advisable to switch if you are nearing the end of repayment tenor. It is because the interest component is generally low at the end of the repayment tenor. Consequently, you won’t benefit from the reduction in interest rate.
● Look for additional benefits offered by the new lender – before opting for a home loan balance transfer, check if your new lender is offering you any additional facilities. Select HFCs offer facilities such as top-up loans when you opt for home loan refinance with them.
A top-up loan can be availed over the existing home loan, requiring no additional documentation. The top up loan can be used to fund any other financial requirement since it does not come with any end-use restriction. Accordingly, know how you can benefit from a top-up loan.
● Maintain a good credit history – To ensure that you are eligible to transfer your remaining home loan balance to a lender with affordable interest rates; you should maintain a good credit history. Your new lender will process your loan application on the basis of your credit history. Accordingly, make sure that you have not defaulted on any payment before and have a high CIBIL score.
Along with these tips, you should also know about the procedure for home loan balance transfer and the documents required for the process. A Housing Finance Company may ask for documents like a NOC. It is vital for all borrowers to know what a NOC is and what its benefits are considering what is required balance transfer.
The steps are listed below –
● Inform your current lending institution via the preferred channel.
● Get the NOC from your current lender.
● Visit your new lender and submit the balance transfer application form along with the essential documents.
● You will receive confirmation from your previous lender regarding the closure of your home loan account.
● Complete the formalities with your new lender and pay the requisite fees.
Apart from these tips, you can also use a home loan balance transfer calculator to check the total amount that you will save if you transfer to a new lender. Carefully go through the terms and conditions before applying for the same.