Purchasing a house can be considered as a major financial investment of an individual’s lifetime. It not only requires proficient understanding and extensive financial planning but also a clear understanding of EMI calculation. Since home loans are usually of longer tenors compared to unsecured credits, lenders offer several features and benefits with these credits, including the provision to opt for a home loan transfer.
Individuals usually opt for a housing balance transfer on their home loans to obtain a comparatively affordable interest rate on their housing credits. However, there are several parameters which need to be taken into consideration before you go ahead and refinance your housing loan.
Things to consider while refinancing your home loan
Homebuyers who have already obtained a housing credit should always be on the lookout for interest rates and processing fees which are at offer from other financial institutions. According to the RBI, interest rates on housing loans are supposed to be updated every 3 months to 6 months in a financial year.
It is advised to opt for a housing loan balance transfer to your desired financial institution where the rates of interest are relatively more comfortable. However, there are various other factors which one must keep in mind while refinancing their home loan; let’s take a look at some of those –
- Why is the tenor of my existing home loan important?
Since the interest component of your home loan EMIs is always higher in the early stages of the repayment period, financial experts advise homebuyers to opt for a balance transfer during the first half of the repayment tenor.
If you opt for a home loan transfer early, you are more likely to reduce your interest payments which will substantially decrease your financial liability; this is the reason why it is considered among the essential tips for refinancing your home loan.
- Are there any additional costs for refinancing?
Most financial institutions charge a specific fee for the transfer of your home loan balance. Homebuyers should be aware of the additional costs such as application fee, processing fee, pre-part-payment charges etc. It is advised to take the help of a balance transfer calculator to determine these other expenses and calculate the total cost of refinancing your housing credit.
This would also help you to estimate whether these additional fees are more than the savings made by a lower payable interest amount. The balance transfer or top up loan calculator also helps to determine the eligible top up loan amount as well.
- Credibility of the new lender
Multiple financial institutions in India offer affordable interest rates on home loans, but not all of them are credible. It is quite important to check the legitimacy of your new lender before opting for a balance transfer of your housing loan.
Hence, it is advised not to select your new lender based on the offered interest rates only. There are various financial institutions and housing financing companies who have developed a reputation for their service in the finance market over the years. So, make sure to perform thorough market research on trusted platforms before opting for a balance transfer.
The above-discussed tips are among the most important factors to keep in mind before following the required steps to apply for a home loan balance transfer. Hence, the home loan transfer facility helps borrowers to reduce their financial liability and also plays a significant role in keeping competitive interest rates on housing credits in the market.