Is Home Loan Balance Transfer a Good Idea?

With a balance transfer on your existing home loan, you can get a better deal. Many borrowers keep complaining about banks being unfair to them when it comes to interest rates on home loans. Banks are quick at hiking the floating home loan rates in a hardening interest rate scenario but when the rates soften, they are not very inclined to reduce the home loan rates.

Many borrowers opt for a home loan balance transfer with other banks or lenders. There are many lenders in the market who are willing to take over home loans by offering a low interest rate to attract borrowers. Even though it seems beneficial to transfer the loan to another bank, it may not be the right solution for all borrowers.

It is necessary for borrowers to do some research on interest rates that are on offer by other banks. The rates can viewed on the website of almost all reputed banks. This will help the borrowers identify the best deal.

According to experts, home loan balance transfer is a good idea for borrowers if the difference is approximately 175 to 200 basis points (1.75 to 2.00 percentage points). The tenure remaining in the original loan will be playing an important role in deciding whether or not switching lenders is a good option. Total savings are likely to be higher if the remaining tenure is longer (12 to 13 years). There is no point in switching to another bank if there are merely three to four years left to repay the home loan. Borrowers also need to consider the prepayment fee.

Be it a mortgage loan against property or a home loan balance transfer, it is very important for borrowers to find out the rates and fees charged by the lenders.

What are the benefits of a Top up Loan on Home Loan?

Many reputed banks offer a top up loan to existing home loan borrowers. The tenure of this loan can be anywhere between 15 and 20 years. It will mainly depend on the term of the home loan.

Even though the tenure of top up loans is based on the home loan term, many banks decide the tenure on the basis of their evaluation. They consider several factors like the borrower’s repayment capacity, credit history, value of the property and outstanding home loan amount. Only when the criteria are met, the bank sanctions the loan amount. Usually, the top up loan and outstanding home loan amount does not exceed 60% of the property’s market value. 10 Lacs INR is the maximum limit under this type of loan.

What are the benefits?

You can apply for this loan and use the amount for meeting personal requirements such as, furnishing a house, high education, purchasing furniture, business needs, marriage purpose or to meet medical needs. According to experts, if borrowers utilize this loan for acquiring add-ons to their existing home or to make certain modifications or renovations, they can claim tax benefits for the same.

Compared to applying for a personal loan, the process for top up loan application is shorter and simpler. Since you will be an existing customer of the bank, you will get it done easily.

Choosing a reputed home loan lender

It is very important to choose one of the reputed home loan providers in Mumbai. Only when you get a good lender, you will get to enjoy attractive interest rates and other benefits. From understanding documentation requirements to learning more about the different types of loan requirements, there is a lot of preparation that should go into obtaining a loan.