When is the right time to consider a Home Loan Balance Transfer?

Transferring your ongoing Home Loan between lenders for a lower interest rate, better terms, and better services is called a Home Loan balance transfer. You may assume that switching the lender as soon as you are offered a lower interest rate might be the best option. However, it is beneficial if you consider other factors as well:

1. Reduced interest rates

The RBI regulates the Cash Reserve Ratio and lender rates frequently. Reducing both might result in a lower Home Loan balance transfer interest rate. However, note that the rates are flexible and can fluctuate over time. If a potential new lender offers a reduced interest rate that effectively decreases your EMIs, you can consider transferring the Home Loan.

2. Cost and terms involved

Transferring your Home Loan every time interest rates are cut is not an option. Some strings, like the transfer cost and terms, are attached when you transfer your Home Loan between lending institutions. Analyse them carefully. If you are unhappy with the current lender, consider switching your Home Loan and settling for the lowest transfer costs and friendly terms.

3. Higher outstanding Loan amount

Opting for a Balance Transfer of a Housing Loan is advisable when the outstanding amount is higher. Like others, a Home Loan EMI constitutes the principal and interest amount. The principal amount gradually reduces as it matures, lowering the outstanding amount. You can make your decision based on the outstanding Loan amount.

If a significant portion of your Home Loan is included in the outstanding amount, you can consider switching lenders for a better deal.

4. Property authorisation

One crucial factor to check beforehand is whether the new lender has approved your property for a Home Loan. Each has different approval lists and procedures. In most cases, the lender approves your Home Loan balance transfer if the property is undisputed and built by a credible builder.

5. Research

It is impossible to change your lender frequently. Therefore, you need to do proper research before finalising the right lender. Apart from cheaper Home Loan interest rates, you should also consider other factors, like the new lender’s reputation, quality of service, and charges associated with the Loan offered.

Depending on your eligibility, the maximum amount you can transfer is the balance on your outstanding Loan or a top-up on your existing Loan. The transfer process takes about 15 to 20 days to complete, provided you submit the documents from the previous lender on time.

Conclusion

You are the best person to decide whether to refinance your Home Loan with a new lender or continue the term with the existing one. You can make informed decisions by creating a checklist based on the mentioned factors.