Potential home loan borrowers conduct adequate research and compare loan deals from multiple lenders before finalising their choice. But there can be circumstances where individuals find a new lender offering a better deal after they have already acquired a particular loan.
In such cases, several borrowers find it practical and feasible to opt for a balance transfer.
While a home loan balance transfer can appear to be a lucrative option to go for, borrowers must be aware of certain vital aspects related to this procedure.
Things to consider prior to opting for a home loan balance transfer
Illustrated below are some factors that borrowers must keep in mind before they choose to go for a home loan balance transfer process:
- Comparing the cost of refinancing with overall savings
Certain charges and fees get involved when an individual opts to refinance a home loan. Thus borrowers must compare all charges and fees prior to choosing a balance transfer. The comparison will let them know whether the refinancing will be financially beneficial or not.
The various refinancing costs associated with a loan include documentation charges, processing fees, stamp paper fees, etc. If these costs outweigh the savings received, refinancing the loan will not benefit the borrower.
- Checking the remaining tenor of an existing home loan
Going for a balance transfer in the second half of a home loan tenor would not help a borrower.
Individuals who have only a few years remaining in the tenor would have already paid a significant portion of the interest towards the loan during the initial phase. In such a case, refinancing the home loan may not be beneficial.
Borrowers will instead increase interest costs if they acquire a new loan to pay off an existing one during the last few years of the loan tenor. Therefore, it is ideal to opt for refinancing in the earlier half of the loan tenor.
- Understand the terms and conditions of a new loan
Apart from a low-interest rate, it is imperative to be aware of all the terms and conditions of the new home loan. Individuals must opt to refinance their home loans only if these terms and conditions are beneficial.
- Check the credibility of new lending institution
Individuals must always conduct a background check of the new financial institution before transferring their home loans. Borrowers must not focus only on the lower home loan interest rate offered by the new lender and ensure that the new financial institution is a credible one.
Opting for a reputed financial institution also enables individuals to benefit from several offers. For instance, renowned lenders extend several pre-approved offers on both secured and unsecured financial products. These offers help simplify and accelerate the lending process. Borrowers can check their pre-approved offers by providing a few details, such as their name and contact number.
- Checking whether the new lender has approved the property for a home loan
Each lending institution has its own approval lists and procedures. It is crucial to check beforehand whether the new financial institution has given their approval for the property regarding the home loan.
In most cases, lenders give approval if a property is undisputed and built by a credible builder.
Besides all these, potential borrowers must ensure that they are punctual towards their home loan repayment. Using a home loan EMI calculator before acquiring the credit will enable individuals to be aware of the equated monthly instalments payable. This will help them better manage their repayments.
Thus, individuals willing to opt for a balance transfer must keep in mind the factors mentioned above.