Updated: Aug 24, 2022, 13:00 ISTShare:
Home Loan Transfer is an excellent way to switch to a different lender offering a Home Loan at a lower interest rate. Are you aware of this transfer facility? Is it possible to transfer a Home Loan multiple times? Read this post, and find out.
For a Home Loan of Rs 50 lakh availed at 8% for 20 years, the total interest outflow would be somewhere close to Rs 50 lakh. But, if the interest rate is reduced to 7.5%, the interest outflow will in turn reduce to around Rs 46.5 lakh, saving you a whopping Rs 3.5 lakh.
Borrowers who are already repaying their housing loans can transfer home loan to another lender offering a cheaper interest rate. Take a look at what a Home Loan Balance Transfer is and learn how a Home Loan can be transferred multiple times?
What is a Home Loan Balance Transfer?
The Balance Transfer facility allows the borrowers, who are currently servicing their Home Loans to switch to another lender. By transferring your home loan to a lender offering Home Loans at a cheaper interest rate, borrowers can save a significant amount of money in the total interest outflow.
Once the loan is transferred, the borrower can start repaying the loan, to the new lender. However, the transfer process can be tedious and involves additional charges.
What is the Home Loan Transfer process and charges?
The Home Loan Transfer Process requires a borrower to pre-pay the loan to the current lender, with the loan amount received from the new lender. It can be time-consuming and involves a lot of documentation. Moreover, if it is a Fixed Rate Home Loan, the current lender can also have prepayment charges of up to 2% of the outstanding amount.
Also, transferring a Home Loan is similar to taking a new Home Loan from a new lender. The new lender will also charge a processing fee on the loan amount, to process your loan. Note that you’ll also have to get approved by the new lender, to use the transfer facility.
Can you transfer a Home Loan multiple times?
Technically, it is possible to transfer a Home Loan multiple times throughout the loan tenure. However, there are several reasons why this is not a wise option. Here are some of the top reasons -
A prepayment penalty (for fixed-rate loans) and a processing fee will be applicable, every time you switch to a different lender
The multiple Home Loan transfer charges could be steep and may not amount to as much as the interest you’ll be saving
The balance transfer process is time-consuming and requires a lot of effort
Also, as the majority of the interest is paid in the first few years of the loan tenure, it won't make financial sense to keep switching in the later years of your loan tenure.
While it is possible to use the Home Loan Balance Transfer facility multiple times, it only makes sense if you take your time to choose the best lender for the switch and only use this facility once, throughout the loan tenure. Before transferring, ensure that your savings are significantly higher than the transfer charges.
Reduce the Interest Outflow with Balance Transfer
The Home Loan Balance Transfer facility is an excellent way to reduce the total interest you pay to your lender on the Home Loan. As housing loans are big-ticket loans, the smallest difference in the interest rates could mean significant savings.
But, do consider the transfer charges and the time and effort that will be spent on the processing, before making the decision.