Decoding Home Loan Transfers: When and How to Transfer

Home - Finance - Decoding Home Loan Transfers: When and How to Transfer
Home Loan Transfers

The home loan interest rates that one gets offered play a crucial role in ensuring the feasibility of the loan. Low housing loan interest rates not only ease loan repayment by helping one keep their EMIs within the affordable range but also help one achieve high home loan ROI by reducing the total interest payout. Current home loan borrowers can now transfer the remaining balance on their home loan from their current lender to another in return for better loan terms and conditions. This facility is known as the home loan balance transfer facility and it is offered by most lenders these days. 

The home loan balance transfer facility can prove to be highly beneficial. However, there are a few things that must be taken into consideration while deciding to opt for these loans. 

To start with, if you decide to transfer your home loan to another lender, talk to your current lender about the prepayment charges you will have to pay. Individuals on floating housing loan interest rates can close their loan account and transfer the remaining balance to another lender without paying any penalty. However, if you are repaying your home loan at a fixed housing loan interest rate, your current lender may apply a penalty. This penalty can range from 2% to 3% of the outstanding loan amount. So, if the remaining balance on your home loan is Rs.25 Lakh and you had opted for a fixed interest rate home loan, the penalty on a foreclosure can go as high as Rs.50,000 to Rs.75000. If the penalty is as high as this, it is unlikely that switching to a lower housing loan interest rate will allow you to save a great deal through a reduced home loan interest rate, until of course the difference in the old and new interest rates is quite steep.  

The second thing that you must keep in mind when opting for a home loan balance transfer is that your current lender may not charge you a foreclosure fee if you are on floating interest rates but your new lender will levy a home loan balance transfer fee or loan processing charges for they will treat your home loan balance application as a new loan application. The home loan balance transfer fee ranges from 0.5% to 1%. Consequently, if the remaining balance on your home loan is Rs.25 Lakh, expect to pay somewhere about Rs.25000 as a home loan balance transfer fee. Now in this particular case, since the loan applicant will have to pay close to Rs.1 Lakh in fees and therefore, until and unless there is a very marked difference in the old and new housing loan interest rates and the remaining loan tenor is also quite long, a home loan balance transfer will not prove beneficial.

Individuals planning to get their home loan refinanced must consider using a home loan balance transfer calculator to analyze whether the decision to transfer their home loan from their current lender to another will indeed prove useful or not. The home loan balance transfer calculator is fairly easy to use. Here’s how you use a home loan balance transfer calculator. 

1. Enter details about your current outstanding balance. 

2. Next, enter the housing loan interest rate at which you are currently repaying your loan. 

3. After this, enter the rate of interest at which you are planning to get your home loan refinanced. 

4. Finally, select your new desired home loan tenor. 

Once you enter these details, the home loan balance transfer calculator will flash for you on your screen the total money you will save by switching to your new lender. The calculator will also show you how your EMIs will change if you decide to go ahead with the transfer. 

Final Words

All in all, the home loan balance transfer calculator is a powerful and beneficial tool that all home loan balance transfer applicants must use before deciding on whether or not they should get their loan refinanced. Home loan balance transfer applicants must also keep in mind that their new lender will treat their home loan balance transfer application as a new home loan application and therefore, they will be considered for a transfer only if they meet the new lender’s home loan eligibility requirements and are able to provide the required documents for home loan transfer.

Written by rameshkumar01