If you are keeping a chunk of your monthly earnings aside for your home loan, you can cut it down even more now. This all is dependent on the services offered by your current lender, who offers the loan after checking your housing loan eligibility.
Around a month back, I was tired of the bad customer service offered by my current lender. Although I gave them a good two-month period of improving their services, I still wasn’t satisfied. Therefore, I decided to transfer my home loan.
What is a home loan transfer?
It refers to the process of transferring an existing home loan from one lender or bank to another. Also known as a balance transfer or refinancing of a home loan, this facility allows borrowers to shift their outstanding loan amount from their current ongoing lender to a new lender who offers better terms and conditions. These can be lower rates of interest, reduced EMIs (Equated Monthly Installments), or even improved customer service.
The primary objective of this transfer process is to obtain a more favorable loan structure and save on the interest costs over the tenure of the loan. By transferring the loan, the borrowers here can take advantage of lower interest rates offered by other financial institutions, especially if the Reserve Bank of India (RBI) reduces the repo rate or if the creditworthiness of the borrower has improved since the loan was initially taken.
What are its advantages?
● Reduced EMIs
With a lower interest rate, the borrowers may experience a substantial decrease in their monthly EMIs. This offers immediate relief to the borrower’s cash flow, making it easier to manage monthly expenses and potentially allowing for additional savings or investments.
● Interest cost savings
By transferring the loan to a new lender with a lower interest rate, borrowers can save a considerable amount on interest payments over the loan duration. This can result in substantial long-term savings, especially for loans with extended tenures.
● Lower Rate of Interest
One of the primary reasons for a home loan transfer is to benefit from lower interest rates. If your new lender offers a lower home loan interest rate compared to the existing loan, it can result in significant savings over the loan tenure. Keep in mind that even a slight reduction in the interest rate can lead to a good amount of long-term savings.
● Improved loan tenure
Home loan transfers also offer an opportunity to revise the loan tenure. The borrowers here can choose to maintain the remaining tenure of the existing loan or opt for a shorter term. Selecting a shorter tenure can help borrowers become debt-free sooner and save on interest costs.
● Consolidation of multiple loans
If you as a borrower has multiple loans, be it a car loan or personal loan, transferring the ongoing home loan to a new and better lender may offer an opportunity to consolidate all the debts into a single loan. This simplifies the repayment process and may lead to lower overall interest rates and EMIs.
When is the right time to consider a home loan transfer?
Although, the below mentioned factors play an important role while you are planning to transfer your home loan, keep in mind to also use a home loan calculator before taking this step.
1. When rate of interests is lower
If there is a significant reduction in interest rates offered by other various lenders compared to your existing home loan, it may be a good time to consider a transfer.
2. Early in the tenure
Transferring a home loan early in the tenure can maximize potential savings.
3. Unsatisfactory customer service
If you are dissatisfied with the current service or overall experience offered by your existing lender, it’s time to switch to a better lender with a great customer support system.
