Home Loan Balance Transfer- Is It Worth it

Home Loan Balance Transfer – Is it
Worth it?
A balance transfer of home loan is done when the total outstanding
principal amount of the the home loan is transferred to a new bank
hence the rest of the EMIs will be paid to the new bank. A balance
transfer is done primarily to gain the financial benefit by a low-interest
rate of the new lender.
A home loan generally goes for a decade or two. The house loan can
even last for 30 years which is the longest tenure of it. So while servicing
a loan repayment for such long years, there may be occasions when the
borrower becomes unsatisfied with the lender in terms of interest rate or
services. In such situations, the only way out is transferring the
outstanding balance to a new lender who is offering a lower interest rate
or better services.

There are many other benefits of a balance transfer. Let’s look at them.
LOW EMI- A balance transfer is done to minimize the burden of a high
EMI amount. One may start the loan with an EMI amount which
becomes heavy in later days because of increased liabilities. In those
situations, a balance transfer can save minimum 5% of the EMI. Saving
5% every month for coming 10 or more years will be a great saving
which can be used for other significant affairs of life.
LOW-INTEREST RATE- The maximum number of balance transfer in
our country is done to gain the benefit from the interest rate which has
been decreased recently. If you have taken the home loan 5 years ago,
you must have been paying an interest rate of 9% to 10%. But the present
home loan interest rate starts from 8.3% which is much lower than that.
So by going for a balance transfer, one can easily save a lot in total
interest payment.
BETTER TOP-UP- A top-up loan is one of the benefits of Home Loan
Balance Transfer. A top-up loan is more or less like a personal loan
which can be used for any purpose. But the difference comes in the rates
and convenience. A top up loan is taken on the basis of the existing
home loan hence the processing of the loan becomes hassle-free and
faster. Moreover, a top-up loan is always cheaper than a personal loan.

ENHANCES CREDIT SCORE- A balance transfer is used as a tool to
enhance credit score. With a balance transfer, a person has to pre-pay the
older loan and starts a new credit account. This activity makes a
person’s credit score take a leap.
When It Makes Sense To Go For A Balance Transfer?
It is true that a balance transfer is done to gain profit on home loans. But
the worthiness of balance transfer depends on a few factors. If a person
wants to gain maximum benefit from the balance transfer he must take
care of the given points.
THE TENURE LEFT- The home loan balance transfer works better if the
transfer is done in the early period. Let’s say, a home loan which was
taken for 25 years and if the balance transfer is done after 20 years then
the profit will be very nominal. It may not be worthy to take the hassles
of prepayment if more than three fourth of the total tenure has already
been serviced.
THE OUTSTANDING PRINCIPAL AMOUNT- Even it matters a lot
how much of principal amount is yet to be paid. The same ethics of
tenure apply to the outstanding principal amount. Along with each paid
EMI, some amount of principal and some amount of interest is
deducted. One must check the outstanding principal amount before
applying for a balance transfer. With a high outstanding amount, the
profit is going to be more.
THE CHARGES- Earlier there was a prepayment penalty which a home
loan borrower had to pay in case of prepayment. But recently RBI has
instructed lenders not to impose any penalty if the loan is at a floating
interest rate. But a borrower still has to pay a balance transfer charges to
the new lender. The balance transfer charges depend on the lender.
Every lender has different amount which is charged in case of balance
transfer.

CALCULATE HOW MUCH ONE CAN SAVE- A balance transfer is
done in order to save some hard earned money. The total savings which
can be made with the balance transfer should be calculated well in
advance. One must know the exact amount which he can save. If he feels
that the time and effort which has been invested in making the balance
transfer is worth, then only he must step forward. If not so, one can
invest that time and effort in other productive ways.
SEARCH FOR THE BEST LENDER- So if you have made up your
mind that you are going for a balance transfer, you must find the best
possible lender. If one wants to earn maximum profit, one must find the
lender who is providing best interest rate and with best terms and
conditions. Along with interest rate, one must check processing fee and
other charges of the lender. If the lender can satisfy all the given criteria,
then only one must go for a balance transfer.
A balance transfer is worthy only if it gives you an ample profit. One
must do a balance transfer at the right time to get the best of it.