When NOT to Opt for Home Loan Balance Transfer?
To attract new customers, banks and financial institutions are lowering Home Loan rates. As a result, many borrowers opt for Home Loan Balance Transfer. Of course, it’s a win-win situation for customers and banks. You get a lower interest rate on your existing Home Loan while the bank acquires a new customer. This scenario is what most borrowers would want. However, there are certain circumstances when a Home Loan Balance Transfer may not be the way forward.
When Home Loan Balance Transfer (HLBT) is Not Advisable
The long tenure of the Home Loan and outflow of money every month in the form of EMIs (Equated Monthly Instalments) can take a toll on you financially and emotionally. You may find Home Loan Balance Transfer Offers Online and decide to jump aboard. Nevertheless, there are occasions when you need to take stock of the situation and determine the way forward without letting emotions get in the way.
High-Interest Rates: The main reason to opt for HLBT is lower interest rate so that you can optimise the EMIs to help you save money each month and reduce the tenure of the Home Loan. You shouldn’t think of refinancing your Home Loan if the interest rate is high, as it will not bring about the savings that you envisaged.
Keep track of the interest rate, and when lenders announce the reduction, it is time to approach them.
Stellar Customer Service: When a financial institution has exceptional customer service, they are more conducive to renegotiating the terms and conditions of the Home Loan. Most lenders are not keen to lose their existing customer base. So, if your Home Loan provider is willing to change the terms to reduce EMIs or increase loan tenure, you shouldn’t contemplate HLBT.
Most banks and financial institutions offer excellent customer service and try to ease the burden on their customers. For some reason, if this is not the case, it is then you should look for a new bank to help in refinancing your home loan. Otherwise, it is futile to shift your home loan and go through the procedure all over again.
Facilitates Home Loan Top-Up: A Home Loan top-up refers to an additional loan over and above your original Home Loan. This new loan can be used to renovate the property, purchase parking space or furnishing your home. If your current lender allows you to top-up the existing Home Loan, there is no need to change your lender.
In some cases, even though the property price appreciates since the Home Loan was issued, lenders may be unwilling to sanction the top-up. It is only under these circumstances that you should seek Home Loan Balance Transfer, wherein the new lender will take the current market value of your property into consideration to refinance the loan and provide top-up.
Factors to Consider:
Home Loan Balance Transfer offers are attractive and may prompt you to take the plunge. It is better to tread cautiously, especially if a lender is offering lower interest rate than what you are currently paying. To determine whether the transfer is the best option for you, take stock of the following:
Loan Time Remaining: Check the tenure of the loan. If it is nearing its end, it hardly makes sense to transfer it as the lower interest rate will not have a profound effect on the EMI. HLBT is advisable during the initial years of the loan when the EMIs are used to pay off the interest rather than the principal.
Teaser Interest Rate: Sometimes, banks offer low-interest rate with the aim to attract new customers. Usually, these rates stay low for a few months, about three to six months, and then increase quite a bit. Hike in the rate will minimise the benefits of HLBT, and you will end up paying the same EMIs as with the previous lender.
Processing Fee: When you transfer your home loan to a new lender, you will have to pay a processing fee. This fee can be anywhere from 0.5 percent to 1 percent of the loan amount. If you cannot bear this amount, don’t opt for the home loan transfer.
Interest Rate: At times, a lower interest rate can reduce your EMIs, but at the end, you pay more interest amount. Hence, before you attempt to refinance your home loan, calculate the total amount you will be paying your existing lender and the new one. Check the entire interest amount in both cases. Transfer the loan only if you enjoy substantial savings over the term of the loan.
If you would like a professional assessment of your Home Loan situation, get in touch with the Mortgage Specialists at MyMoneyMantra who will help you every step of the way.
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