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Everything you need to know about Home Loan Balance Transfer

Everything you need to know about Home Loan Balance Transfer

When purchasing a house, many people rely on a home loan to finance the purchase. The interest rate is one of the key factors that determine the cost of the loan. If you’re paying a high-interest rate on your home loan, you may consider a home loan balance transfer. A home loan balance transfer is the process of transferring the outstanding balance of your existing home loan to a new lender offering a lower interest rate. Here are some things you need to know:

Reasons to consider home loan balance transfer:

  • To reduce the interest rate on your home loan and save money on monthly installments and the overall cost of the loan.
  • Switch from a fixed-rate loan to a floating-rate loan or vice versa, depending on your preference and financial situation.

Eligibility criteria for home loan balance transfer:

  • You must have an existing home loan that has been active for a certain period, usually between 6 months to 1 year.
  • You must have a good credit score, a stable income source, and a good repayment track record on your existing loan.

Cost of home loan balance transfer:

  • Home loan balance transfer involves some costs, including processing fees, administrative charges, legal fees, and valuation charges.
  • These costs are usually lower than the amount you save on interest by switching to a new lender.

Process of home loan balance transfer:

  • Apply for a balance transfer with the new lender.
  • Provide the necessary documents, including your home loan statement, income proof, identity proof, and address proof.
  • The new lender evaluates your eligibility and creditworthiness.
  • If approved, the new lender pays off the outstanding balance on your existing loan to the old lender.
  • You start making the monthly installments on the new loan to the new lender.

Potential drawbacks of home loan balance transfer:

You may lose some of the benefits you had with the old lender, such as prepayment options, loan tenure, and foreclosure charges.

You may incur some costs associated with the transfer.

Factors to consider before opting for a home loan balance transfer:

  • The interest rate difference between the old and new lender.
  • Processing fees and other associated costs.
  • Repayment tenure.
  • Prepayment options.
  • Foreclosure charges.
  • Customer service and support of the new lender.

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