Home Loans are an ideal funding source to help people fulfill their lifelong dreams of owning a property. Prospective home buyers can directly approach a housing finance company to obtain a Home Loan. On the other hand, switching loan providers is just as easy if another lender offers a better interest rate, leading to money savings. However, while contemplating a balance transfer, check out the Home Loan balance transfer charges as per the RBI guidelines and consider these five things before taking the giant leap.
1. Remaining Loan Repayment Period
A Home Loan balance transfer works best if the remaining loan repayment period is still more than five years. Ideally, most Home Loan borrowers transfer their loan when another loan company offers them a reduced interest rate or when the RBI reduces the repo rate for a housing loan. However, transferring loans when the remaining tenure is less than five years does not make good sense. The borrower has to bear the processing charges and other miscellaneous fees while switching lenders. In contrast, a longer repayment tenure helps avail maximum benefits from the reduced interest rate. Thus, switch loan providers as early as possible instead of at the near end of the loan repayment tenure.
2. Missed EMI Payments
While switching to a new loan company offering a reduced interest rate, the borrowers must ensure they never miss EMI payments. Regular EMI payments are essential since new lenders do not prefer borrowers with irregular repayment records. While applying for a Home Loan balance transfer, the new loan company will check the applicant’s credit report and loan account statement to analyse whether they should approve the transfer request or not. Those with a history of missing EMIs or default payments have a higher chance of rejection.
3. Property-Related Documents
Documentation is a crucial parameter for high-value loans like Home Loans. Therefore, before applying for a Home Loan balance transfer, ensure you have all personal and property-related documents in place. Understanding the new lender’s documentation requirements and fulfilling them without hassles ensures a smooth loan transfer process without obstacles.
Fix an appointment with the existing loan company and request them to dispatch the property-specific documents within a few days. Remember, the new loan company will ask for these documents against the loan and retain them until the entire loan repayment. So, ensure communicating the new lender’s requirements to the existing lender effectively.
4. Prepayment Penalties
Owing to the tough competition and the latest Home Loan balance transfer charges RBI guidelines, most housing finance companies do not levy prepayment penalties when a borrower forecloses a loan before the term-end. However, they have conditions like a specific number of years or fixed or floating interest rates to charge these penalties. Therefore, while transferring a loan, the current or new loan company may charge these penalties on certain individuals based on specific regulations. Sometimes, the new loan company does not consider the total repayment tenure but only the new loan term while transferring the loan.
Transferring the loan will be useless if the prepayment charges exceed the interest cost saved with the step. As such, check if any prepayment charges apply and how big they are before repaying the current loan before the loan tenure. Use a Home Loan Eligibility calculator to determine the loan amount and plan the application accordingly.
5. Loan Processing Fees
We know that loan companies charge a processing fee when sanctioning a loan for the first time. When transferring a Home Loan, the new lending institution also levies processing charges to complete the procedure. However, many NBFCs may waive this fee in some cases. Applicants with a consistent repayment history and high credit scores have more negotiating power to save this fee. Many loan companies do not charge processing fees for the balance transfer option. So, research and find such finance companies to save some bucks on the processing fees.
Conclusion
A home loan balance transfer is an excellent option that helps reduce the interest rate and make repayments easily manageable. Taking this significant step results in massive savings, especially if it is a high-value loan with a substantial part of the loan term left for repayment. However, ensure keeping an eye on the latest Home Loan balance transfer charges as per the RBI guidelines to gain maximum benefits from this facility.
Also Read: Smart Tips to Increase Home Loan Eligibility Quickly
