If you are an existing home loan borrower, then you must be keeping a check on the changing interest rate, if you do not then start doing it right away. There are many recent developments which have been taking place in the banking industry, Reserve Bank Of India reduced the repo rate by 40 basis points from 4.4 per cent to 4 per cent. The cut in repo rate has lowered the home loan interest rate as the Reserve Bank of India has made it mandatory for the banks to link interest rates on floating-rate loans to an external benchmark such as the repo rate so, they must not follow the marginal cost of funds-based lending rate (MCLR) regime, MCLR is a tenor-linked internal benchmark, which means the rate is determined internally by the bank depending on the period left for the repayment of a loan.
What Is Home Loan Balance Transfer?
Home Loan Balance Transfer is a cycle of moving your outstanding home credit sum from one bank to a bank that offers lower interest rates on the loan. next. This is done fundamentally to bring down the paces of premium or profit better assistance from the bank willing to take over the home credit. To get the balance transferred to the other account, you have to go through the same process which was done when you applied for the loan. The whole process might take up to 5-6 days. But the transfer comes with its own fees which may be as low as 1 percent, the fee is payable to the bank where the loan is getting transferred. Most of the banks have restricted the transfer period which is called lock-in period where you cannot go for a refinancing option.
When to transfer home loans?
- From time to time, the bank rates and CRR keeps on fluctuating as they are regulated by RBI, which at times reduces the interest rate on the loans. That is the time when you can transfer the home loans as it might lower down the EMI burden.
- Before moving to another bank, it is important to analyze the cost of transfer and terms of transfer. If you are not happy with the service provided by your bank then you should switch.
- To reap the benefits, transfer the loan in the initial few years as the interest component is high at that time in the EMI.
- In case you have taken a loan on a property, check if your bank has approved the property for the home loan.
Benefits of Switching Home Loan
- If you are switching your home loan to another account, then you may be able to get EMI which is lower than your current lender due to lower interest rate.
- It is the best option to switch in case you are thinking to reduce or increase the tenure of your loan.
- Balance transfer makes you eligible for a top-up to add balance in the borrower’s account.
- Income eligibility might also get decreased as every organisation has different parameters to calculate the income eligibility.
Things to consider before switching home loan
- It is very important to read terms and policies of home loan transfer carefully, as some banks do not have the facility as well, do not just get attracted towards the lower interest rate.
- Check your credit rate, the fallen credit rate between the time when your loan was approved and now can impact the chances of being qualified for the loan transfer.
- If you have not made regular payments with the current lender can impact the eligibility for the loan transfer.
- Check for foreclosure charges, the foreclosure of your home loan is the full repayment of your remaining loan amount in one single payment instead of paying your monthly instalments, which is chargeable by some of the banks.
- Make sure you have all the documents like KYC, property documents, bank statements, income proofs, original documents with the existing lender and previous loan account statement and NOC certificate from your previous lender which will be required for the transfer.
- In case you are not facing any customer services issues with the current bank then you can also reset your existing home loan with them by writing a letter stating that you are getting a better offer from another Home Loan financier. If the current financier agrees then you can save transfer charges and time which will be spent in the transfer process.