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Why will an individual plan to transfer the home loan?

Monday, November 14, 2016 23:11
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A home loan is the most important financial solution for an average individual borrow once in their lifetime. Even a slight reduction in interest rates translates to substantial savings in the long run. Home loans are a big ticket and such reduction will definitely prove easier on your pockets. It has been mandatory by the government of India that banks should pass on the interest rate benefits to existing borrowers with immediate effect. But due to slow banks procedure often, borrowers are unable to take advantages of these cuts and it may prove expense. At such times, customers prefer home loan balance transfer and start migrating to other banks in search of better and affordable interest rates.

Before, opting for home loan transfer let’s check as a customer what can you do. Firstly, if you make your payments on time and keep a good track record, and good credit score, will help try and renegotiate with your current lender to let you avail lower interest rate. In case your bank doesn’t oblige, transfer the loan to the new lender becomes an option.

Home loan balance transfers are called as the refinancing of home loans. It is an accessible and easy method you could opt for in order to take advantage of lower interest rates prevailing the markets.

Some reasons for customer to opt for home loan transfer are as follows:

•Lower interest Rates: Of course, it the prime reason why borrowers look for home loan refinancing, In some cases, lenders permit conversion of the existing higher interest rates to a lower rate, however, they charge a high conversion rate.

•Re-negotiation: Customer sometimes wishes to renegotiate some aspects of the loan structure such as they may want an EMI reduction or increase in the loan tenure. But their lender bank may refuse it. At such time, they opt for balance transfer.

•Top- Up: If the property value may see a sharp increase in comparison to the original value, the borrower may wish to top-up the current loan to meet other requirements like home renovation, etc. If the current banks agree, the borrower will continue with them else, may opt to migrate to the new lender to benefit from home loan balance transfer.

•Sometimes, borrowers are not happy with the customer service, accessibility, loan structure and overall service of their current lender and may choose to transfer to a new lender.

•Generally, banks or finance companies keep talking about lower EMI’s and longer tenure. In case, when you calculate the outflow and find that in the longer tenure you end up paying the higher loan amount then you should opt for the transfer option. Do an online comparison and also talk to a financial expert for better transfer deals. If your budget is not bootstrapped.

Home loan balance transfer is possible only if you have been regular in loan repayments t the current bank. It involves processing fees to be paid to the new bank. It could range between 0.25 to 1.5% of the home loan principal that is transferred or it could be fixed processing fee. Some banks also levy administrative charges, legal charges, stamp duty and other miscellaneous charges. It makes sense to compare the total of these charges against the benefit of the reduced interest rate. 

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