Transferring your Home Loan to another bank or NBFC is an underrated but highly productive strategy if approached correctly. In most cases, you can consider balance transfer if the existing lender is charging higher interest rates than the new one. Besides that, most financial institutions are currently providing home loans at lower interest rates, which further justify your willingness towards a transfer.
In the subsequent sections, we shall take a few home loan balance transfer factors into account, which might impact your decisions towards the same:
- Consider the type of loan
Apparently, you are making the shift from one bank to the other due to the lower interest rates. Therefore, before making the jump, you might have to check whether it is an MCLR or RLLR loan. Personally, we would ask you to move ahead in case of a repo-linked lending rate as the RBI has reduced the same by 40 basis points to facilitate lending.
- Compare extensively
Even if you have avoided spread-based loans and opted for lenders who offer floating, repo-linked interest rates, it is still advisable to make an extensive comparison. Transferring balance from one lender to the other is a big decision, and you must factor in even the smallest dip in the interest rates to balance out the overheads if any.
- Calculate the Overheads and Penalties
Despite the willingness to save money in the long run, you must account for the penalties charged by the old bank, processing fees levied by the new bank, and other overhead costs. If the additional costs outweigh the savings or are comparable to the saved financial face, you must avoid the hassle of making a transfer. Not to mention, if you are transferring the loan at an early stage, you must also pay the foreclosing charges.
- Evaluate Transfer based on the tenure
Home loan transfer looks like a plausible decision only if you are making one early, preferably around the 5 to 8-year mark. However, if you are at the end of the tenure, there isn’t a point shifting the balance as you wouldn’t be making any sizable gain towards the same. As a rule, you must head back to the home loan interest calculator to evaluate the tenure, savings made, the sum payable, and other aspects before making or avoiding the shift.
- Keep an eye on the Credit Score
Balance transfer often qualifies as applying for a new, pre-approved loan. Therefore, if you have a housing loan transfer on your mind, try and keep the credit score within the permissible limits to avoid any kind of loan approval impact.
Home loan transfer can be an extremely resourceful step in the post-covid19 era as if approached correctly; it can guarantee a state of long-term financial well-being. However, each of the mentioned factors needs to be taken into account before considering the decision of transferring the loan from one lender to the other.