How many EMIs into your Home Loan are you? Have you looked at the market lending rates recently? Are you paying an interest rate that is higher than prevailing rates?
Home Loan and Interest Rates
Your Home Loan is a secured loan. Compared to unsecured loan options, this huge loan comes at a comparatively less rate of interest. However, when you consider the large amount and the long tenure it takes to pay off the loan, even this low interest rate can cost you a lot. At the end of the tenure, you will most probably have paid more than twice the amount you borrowed.
So, keep checking your loan rate and the prevailing interest rates in the market. If you find that interest rates have fallen, think about ways to get the interest rates reduced for your own loan. One of these options is a Home Loan Balance Transfer.
Even a half percent reduction in the interest rate can translate into a savings of lakhs of rupees. So, if new Home Loan rates are lower, and your own bank offers reduced rate to new customers, it is time to take action.
First, talk to your current lender. See if they will negotiate the terms with you and reduce the interest rate for your loan. If you have an established relationship with the bank, this might be easy to do. However, if your lender refuses to co-operate, start looking for a better offer and transfer your Home Loan.
Home Loan Refinancing
So, you have tried talking to your lender but you didn’t get a favorable response? Start comparing Home Loans and get a few good Home Loan Balance Transfer quotes. Use online loan comparison facilities for this. They can compare several offers and then show you the best choices for your conditions.
Before You Refinance
Transferring your loan to lower rates could be a good idea, but remember to take into account all the costs involved. The interest rate is the prime motivator for a transfer. However, there are other important points to consider.
The Fees and Charges
When you transfer your loan, you have to pay many charges and fees. First, if you are on a fixed rate loan with your current lender, then you have to pay a penalty for foreclosing the loan. If you are on a floating rate of interest on your Home Loan, this problem does not arise. RBI guidelines prevents banks from charging prepayment penalty on floating rate Home Loans.
If you have to pay a prepayment penalty, note that down. Then, while you transfer the loan, the new lender will charge processing fee and other fees to give you the new loan.
Factor in all the costs involved like processing fee, stamp duty, legal fees, and part-prepayment penalties. Then calculate the total interest amount you have to pay on the new loan. Add the charges and fees to this amount, this gives you the cost of the loan.
Compute the total interest amount yet to be paid on the outstanding balance with your current lender. If this is less than the cost of the new loan, stay with your current lender.
Time and Effort
When you transfer your loan, you have to do the paperwork all over again. You’ll need to spend the time and effort to recover the loan and property papers from your current lender. The new lender will also take time to verify your documents, do a credit check on you, and decide whether to sanction the loan. If you decide that the savings you get from the transfer is well worth the effort, then go ahead and apply for Home Loan Transfer online.
Use Home Loan balance transfer calculator tools to find the best offers. If you have acquired enough equity on your home, the new lender might even offer you a Balance Transfer and Top Up. If you need funds, a top-up loan might be a good option. It comes at a lower rate of interest than a personal loan and it enables you to utilize the equity you have on your home.
However, be sure you can afford this loan, because it will add to the EMI you have to pay each month towards you Home Loan.