Home loan balance transfer – Why you need to do it now

by Litty Jose Finance Analyst

Home loan balance transfer is the process of transferring an existing loan to another bank or NBFC, because the borrower is getting better rates or services there. After demonetization a lot of banks have reduced their home loan interest rates. Leading this set of banks is SBI who has reduced their housing loan interest rates by 50 basis points making their current rate is 8.5 per cent. Following SBI other banks and NBFCs too have reduced their rates, one of whom has reduced its housing loan interest rates by 45 basis points. These rate cuts will mainly benefit new borrowers. But this doesn’t mean that existing borrowers cannot benefit from these reduced rates at all. This slashing of rates makes this the best time for home loan transfer.

If you think you only have a few years to go for your loan to be paid up and don’t really see the need to transfer your home loan now, here are some reasons that may make you think otherwise.

1. Savings is the main reason for transferring home loans. You can save a lot on your EMIs if you get a reduction on your housing loan interest. But this will only make sense if you opt for a home loan balance transfer where the total savings in interest pay-out is substantially higher than the cost incurred while transferring the loan. Usually, the new lender will charge various fees, such as conversion fee, processing fees and administrative charges during the loan transfer.

2. Transferring your home loan to a new lender is similar to availing a fresh loan, where the new lender will have its own set of terms and conditions. You can use it to re-set your loan EMI and tenure and top up as well. You can opt for a home loan transfer if your existing lender is not allowing you to reset the terms and conditions of your loan.

3. Usually banks and NBFCs provide top up loans to existing borrowers. These are just like personal loans but their interest rates are lower than a separate personal loan. One may require a top up in case of funds required for an emergency or in case of a home loan for renovations. Transfer your loan only if your current provider is not allowing you a top or if the new provider is offering you a better rate.

A home loan balance transfer can help you reduce the burden of high EMIs and also help you save more. If you have an existing housing loan then maybe now is the right time to transfer it and get better returns.