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.