Interest! It is not the only thing a borrower should know while in process of home loan balance transfer. A home loan balance transfer is a process which involves a lot more activities than just saving interests. It involves a set of activities to be conducted before transferring the home loan balance to another bank. Well, first of all, let us know about home loan balance transfer. The process in which a borrower transfers the home loan balance from one bank to another in exchange for the benefits availed to the borrower by the other bank. Borrowers are hardly aware of the things to be kept in mind while transferring the home loan from one bank to the other and are unable to avail benefits out of it. Well, here are a few things to know about home loan balance transfer.
- HOME LOAN INTEREST RATES
The interest rate is the primary thing to be kept in mind by the borrowers when it comes to the transfer of the home loan balance. This is one of the parameters borrowers should know about home loan balance transfer. If a bank is providing a reduction of 50 basis points then it is not worth if you’re doing the transfer of your home loan by the mid of your home loan tenure. The yardstick to be kept in mind while transferring the home loan balance to another bank is 50 basis points when the balance transfer is done in the first 5 years 50-75 basis points if done in the period of 10-15 years and 100 basis points if done in the period of 15-20 years. Also, the home loan balance should be done in the early tenure of your home loan to avail maximum benefit on the home loan. If done in the tenure when the loan is about to expire then it is of less worth.
- CALCULATE THE CASH OUTFLOW
The new bank may try to arrest you with the lower interest rates provided by them. But, you should keep this in mind that when you are doing the home loan balance transfer you are extending the period of your home loan i.e. you will have to pay more amounts to the bank. So, you must always keep in mind the cash outflow of the loan so as to understand the benefit you would be receiving against the transfer of home loan.
- PROCESSING FEES AND OTHER CHARGES
This should be kept in mind when you go for the home loan balance transfer the bank straight away demands 0.5% of the amount of the home loan as the processing fee on the home loan balance transfer. So it is advisable to do the home loan balance transfer in the early periods of your home loan tenure. So, against the processing fees, you can gain a considerable amount of savings on the interest. If done in the expiry period of the tenure of your home loan then processing fee will result into not a considerable amount of savings on the home loan. Also, you will have to get released the papers of your home which will again take a considerable amount to and fro. So, home loan balance transfer is a time-consuming activity. You should always know about the processing fees and the risk you are taking for the savings on your interest.
- COLLATERAL TO OUTSTANDING RATIO
There is a probability that the new bank will demand the papers of your home while availing you the loan at the lower interest rates. Here, if you have paid less amount of your home loan to the previous bank then it is advisable to keep the papers of your home as collateral in the case of contingency. Also, if a considerable amount of loan is paid to the previous bank then you should not offer your home papers as collateral but an asset which is less in value. If you are offering collateral which is double the worth of your loan then it is not advisable. You can avail a new loan with the help of that collateral. Secondly, it is not advisable to do a home loan balance transfer if a considerable amount of your loan is paid to the bank. It is rather advisable to talk to the current bank on the grounds of regular payments to reduce the interest rate.
Lastly, the borrower must know a few things about home loan balance transfer i.e. the interest rates of both the banks, the tenure of the home loan, the processing fees of the home loan transfer and the calculative benefit of the transfer against the expense.