Should You Transfer Your Home Loan
A Home Loan can help you buy the house you desire, but it is important that you manage your Home Loan and take the necessary decisions wisely.
home loan transfer
The property rates might have declined after demonetization, but still buying a house can be a difficult task for some people. To purchase a house, you need to spend a huge sum of money, the basic price of houses in India can go from lakhs to Crores which might not be feasible for everyone. Falling short on a budget to buy a house is a common scenario faced by many people, due to the high prices of houses in India, many people turn away from buying a house and prefer to live as tenants.
On the other hand, there are people who prefer to buy a house by taking a Home Loan from a financial institution. When you are falling short on funds to buy a house, it can help you cover the financial gap. However, after taking a Home Loan, it might feel good for some time, but the problem starts when the loan starts to become a burden.
A Home Loan can be beneficial to buy a house, but the repayment of a Home Loan can be challenging. It is often observed that while repaying a Home Loan people struggle with longer tenor, high-interest rates and unmanageable EMIs of the loan. There are times when people fail to pay the loans and end up getting a bad credit report and damaging their credit score. However, such a dilemma can be avoided if you play smart and make wise decisions towards managing your loans.
Pre-Payment is an ideal way to get rid of your Home Loan, but managing money in such a great volume is not easy for everyone. The best way to repay your loan smartly without damaging your credit score is opting for a Home Loan balance transfer.
What is a Home Loan balance transfer?
A Home Loan balance transfer is a provision made by the financial institutions which enable you to shift or change your lender during an ongoing tenor of a loan. Mostly, the people choose balance transfer to avail a lower rate of interest offered by a different lender.
Should You Transfer Your Home Loan
For instance, if you have been paying a Home Loan to lender ‘A’ from 5 years at the rate of 13 percent per annum while, you have almost paid 30 percent of the loan amount. Then you find out that lender ‘B’ is offering Home Loans at an interest rate of 11 percent. Technically, the interest rate of 11 percent will be beneficial. Hence, you can choose to switch your lender from lender A to lender B by paying the necessary charges and gain benefit for the rest of the tenor of the Home Loan.
A Home Loan switch may seem beneficial, but there are some things that you need to consider while opting for a loan switch.
Interest rate: The lenders can provide you two types of interest rates on Home Loans i.e. Fixed and Floating rate of interests.
- Floating rate: Floating interest rate is not fixed and keeps changing according to the market conditions.
- Fixed rate: Fixed rate of interest stays the same throughout the entire tenor and does not change even with the changes in the market conditions. However, there is an adjustment clause, according to which the lender can change the interest rate according to the market rates if the interest rate on your loan stays stagnant for a long time.
Processing fees: Switching the loans also has different types such as:
- Interest type change: If you have availed a Home Loan with a floating rate of interest at the time of increase of the interest rates in the market, you can switch from floating to fixed interest rates and vice-versa by paying a processing fee charged by the lender. The lender usually charges 0.35 percent, if you choose to change the interest type within the bank.
- Lender Switch: If you are planning to switch the lender to avail a low-interest rate, you need to check the processing fees charged by the new lender and penalty charges by the old lender for the balance transfer.
Terms and conditions: You need to check the terms and conditions of the new lender before switching the loan. It is very important that you scrutinise all the loan documents carefully as the terms and conditions might not change until the end of your loan. If you neglect any point or hidden costs levied by the lender, you might end up in trouble later.
A Home Loan can help you buy the house you desire, but it is important that you manage your Home Loan and take the necessary decisions wisely.
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First Published: Sep 22 2017 | 2:25 PM IST
