Home Loan Balance Transfer: Should You Do It
A Home Loan Balance Transfer, is the process of shifting your Home Loan from one bank or lender to another. Yes, even if you take a Home Loan from one financier, you can still transfer your entire loan outstanding to another lender, if you want. Now, why would someone want to do that? The most common reason to transfer your Home Loan to another bank is, if the other bank is offering lower interest rates or a better proposition, as compared to the existing lender. If lower interest rates are available elsewhere and you are still paying a higher interest with your existing bank, then transferring your Home Loan makes perfect sense.
But, Balance Transfer Loansare not something that you can get, without due consideration. There are a few factors that you must keep in mind before going for a balance transfer. Let us understand a few situations where you can consider doing a balance transfer.
When should you think of a balance transfer?
Lower Interest Rates
A lower rate of interest helps you in saving the EMI amount, as well as the interest paid towards your Home Loan repayment. Thus, if the interest rates are cut, and another lender is offering Home Loans at much lower rates, then you must consider transferring your Home Loan to the new lender, because of the reduced Home Loan Balance Transfer interest rate. This will reduce your loan burden significantly, by reducing your EMIs, and also save on the interest amount on your Home Loan.
The type of financial institution, where you are thinking of transferring your Home Loan to, also matters. Banks offer a rate of interest that is linked to an external benchmark that is monitored by RBI. Therefore, the change in the rate of interest is transmitted faster, whenever there is any change in the external benchmark rate. On the other hand, NBFCs/HFCs offer a rate of interest, which is linked to PLR (Prime Lending Rate), which is their own internal benchmark rate.
ICICI Bank offers external benchmark linked, i.e. repo rate linked rate of interest on Home Loan Balance Transfer, that can help you make an informed decision.
Cost of Balance Transfer:
Even though lower interest rates offered by other lenders, is a good reason to transfer your Home Loan, you cannot just keep transferring your loan, each time a lender offers a lower interest rate. There are certain terms of balance transfer as well as charges for a Home Loan transfer that you must consider. If you're okay with these costs and terms, then you can go ahead and transfer your loan.
Long Loan Tenure:
Proceeding with a Home Loan Balance Transfer only makes sense if your outstanding loan tenure is still significant. You won't benefit from a loan transfer, if you only have a couple of years left on your Home Loan. In the final years of your loan tenure, the cost of the transfer itself will exceed any interest benefit that you may have.
Authorisation of Property:
Before you go ahead with a balance transfer, ensure that your loan property is approved by your new lender. Every lender has its own protocols for property authorisation, so even if your existing lender had approved your property, your new lender must also do the same, following their own protocols.
A Home Loan Balance Transfer is an important decision when it comes to your Home Loan. You must properly consider all aspects of it before proceeding. You do not want to be in a position where you proceed with all the paperwork and transfer your loan, only to realise that your savings on interest are not as significant, as you thought them to be. Hence, You can first calculate Home Loan Balance Transfer savings, consider each factor carefully and only then go for a Home Loan Balance Transfer. With ICICI Bank, the Balance Transfer Home Loan process is simple and convenient. Find out the terms and get your loan transferred, today.
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