With the current downfall of the economy, there are many banks offering low interest rates on home loans. This makes it imperative to evaluate if transferring the home loan balance amount can help you save some money.

Home loans act as a high amount of debt as compared to other loans, which is why it has a significant influence on the interest rate. With the current market situation, there are a number of banks to pick from, to perform home loan balance transfer which can result in reduced interest rates.

If you are wondering whether it is legal or not, you will be surprised to know that shifting your home loan to another bank offering low interest rate is completely legal and allowed by several prominent names in the financial industry in India.

Evaluating Savings

Suppose Krishna availed a home loan at 10% per annum. He has 15 years remaining to repay the loan amount where the unpaid principal amount is 20 lakhs. Here if Krishna decides to transfer the loan to an interest rate of 9% per annum then he would comfortably save approximately 14,500 rupees per month thereby allowing him to save approximately 2 lakh 18 thousand rupees in 15 years.

Home loan balance transfer can be a time and money consuming process; therefore, the borrower must take decisions regarding this very carefully. They must check their home loan balance transfer eligibility and perform proper research regarding the process, documentation, liaisons process etc.

How to check if it’s time to switch?

Apart from costs, the borrower must check if the rates are connected to any external benchmark/marginal cost of funds-based lending rate (MCLR). When the loans are related to MCLR, borrowers can get lower rates of interest when shifting the rates connected to an external benchmark.

MCLR helps the borrowers to understand when there will be a slight shift with the rates, depending on the external benchmark or repo rate. Try to shift to a bank if you have a loan with a Non-Banking Financial company (NBFC) as the external benchmark is applied only to banks.

Benefits of Home Loan Balance Transfer

Here are some benefits you gain from Home Loan Balance Transferring facility:

∙         Lowers the monthly payable EMI.

∙         Reduces the interest rates on home loans so you save more.

∙         Increase in Credit Score as a result of transfer of home loan.

∙         Negotiation opportunities with the lender can help you choose better when going for a home loan balance transfer.

∙         Opt for Home loan balance transfer even in case of dissatisfaction with the services of existing bank/lender.

∙         Increase or decrease the tenure period of home loan with the new lender while opting for another lender.

In a nutshell

Home Loan Balance Transferring is a process that helps the borrower to operate on a tight budget and provides some financial relief as well. However, to make a well informed decision and ensure that it works for you, connect with Finserv markets and stay on track with the best rate of interest for your home loan.