Understand the Merits and Demerits of Availing Home Loan Balance Transfer

To have a home to call one’s own is a human desire. Man lives and works very hard to achieve this dream, but not everyone can save up enough to buy a home outright. Home loans make this dream achievable for everyone. If you can save up some money for your home, the banks and other lending institutions are willing to immediately fund the rest of house for you at low rates of interest and you can repay the amount slowly with interest through Equated Monthly Instalments (EMIs). Using a home loan calculator can help you understand what amount you should take as a loan so that you can comfortably repay.

What Are the Benefits of a Home Loan?

A big benefit of availing a home loan is that you can have the right to live in your home right from the moment you get possession even if you personally have not paid fully for it. Moreover, while you make small monthly payments, the value of the property continues to appreciate with time. You can save on rent as you would be living in your own house. If you decide the EMIs sensibly while considering your monthly budget, they do not put an excessive load on income and you can manage the finances comfortably.

Along with this, you would get to avail tax benefits on home loan at the time of filing your tax returns. You can claim deductions on the interest that you pay for your housing loan over the years.

What Do the Lenders Gain from It?

The lenders obviously make good money from the interest income and hence each one wants the maximum number of borrowers to be associated with them. They all try to offer lower rates of interest and better offers than the competition to attract these consumers. The consumer also has the option of home loan bank transfer, which makes the competition even fiercer. They also get more potential consumers for their other products and services.

What Is Home Loan Bank Transfer?

As the banks offer the option of transferring the balance outstanding on the loan from one institution to theirs, the consumers feel inclined to go for it as they could get a better deal on the rate of interest. You could avail a new EMI value calculated based on the new amount, new interest rate and possibly a new tenure. With the home loan EMI calculator India, it is easy to evaluate the change and the possible monetary benefit.

What Are the Merits of Home Loan Balance Transfer?

Here are the advantages of home loan balance transfer:
The main advantage of this is a better interest rate and hence better savings.
Most banks would welcome you on board without any additional charges. This is, of course, subject to clearing the application procedure.

The service is open to all consumers, provided they have been making their scheduled payments on time previously and have all the documentation in place.

Your loan transfer approval is easy if you have been maintaining a good credit score.
You could also possibly avail a top-up loan from the new lender, which can be utilized either for paying your debts earlier or for refurbishing your home.

You can actually negotiate the rate of interest if you have been regular and punctual with your payments. Make good use of the housing loan EMI calculator to work out a good interest rate before you approach the bank. Additionally, you can ask for other benefits in terms of schedule and tenure.

Additional Read: Make Housing Loan Calculation easy by Online Calculator

What Are the Demerits of Home Loan Balance Transfer?

You can avail this facility only after you have completed a specific tenure with the original lending institution.
You may not be able to avail the benefits of this service if you have been inconsistent with your payments in this initial tenure.

The new lender will try to tempt you to use more products from their portfolio such as insurance products and credit cards. These could be detrimental to your financial planning, so be careful and sign up for only what you need.
The transfer could come with certain terms and conditions for the benefit of the lender, which may not be suitable for you. Check out all details to avoid falling into a trap. Such conditions could include availing property insurance from a specified vendor or providing a certain amount of business to the bank annually. Read the agreement carefully before signing it.
There could be hidden charges, which have not been specified to you at the time of discussion. Calculate all the amounts using the home loan interest calculator and be aware of the EMI and any other charges that you need to pay. Do question any additional charges.

Since you are offering them additional business from their competitor, you have the upper hand and you can take advantage of that and get any additional charges waived off.

Before you opt for the balance transfer, you must understand the long term and short term planning of your finances. Check all the financial details, work out all the payments and see if you are able to get the benefit as expected. If you are careful with the fine print and the terms and conditions applicable, getting a balance transfer on your home loan can be very beneficial to you. You must take advantage of your position as the customer and negotiate the best deal for yourself.

Author Since: Jan 17, 2019

Anoop Bansal, a professional Chartered Accountant based in the National Capital - Delhi. I have worked for the top-notch Indian and International banking firms for the past 10 years. Currently, I work at emi-calculator.loan blog and a financial consultant for different SMEs in India. Follow me on Facebook, Twitter and Linkedin for more information.

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