Rising in Interest Rate - Opt for Home Loan Balance Transfer

• Allows you to switch to a new lender
• It works best if you are in the initial phase of a home loan
• Helps you save on the total interest payable
• Benefits of top-up loans and 3 EMI holidays

With the tightening of home loan rates, following RBI’s hike in repo rates, the burden of increased EMIs is a concern for existing home loan borrowers. Irrespective of a home loan borrowed on MCLR rate or a fixed rate, a hike in home loan interest rate is bound to put pressure onthe finances of a borrower. Here’s how a home loan balance transfer can help.

What is Home Loan Balance Transfer?

A home loan balance transfer refers to the exercise wherein the entire unpaid principal amount is transferred from one financial institution to another. It meansyou, as a borrower, need to pay your EMIs to the new institution to whom you have transferred your loan at the rate offered by the latter. Generally, borrowers go for home loan balance transfer when they find a new lender offering the best home loan rates than the existing lender.

When to Go for A Home Loan Balance Transfer?

A home loan balance transfer works in your best interest if you are in the early phase of your home loan. This is becauseduring the initial period, the interest component is higher than the principal. So, an early switch helps you save on the interest outgo. In such a scenario, a reduction in rates of even 50 bps by the new lender can help you make significant savings in the long run.

For instance, if you have an outstanding loan amount of Rs.50 lakh for a period of 15 years, at an interest rate of 10%, the total interest payable is Rs.46,71,511. Transferring this balance to a new lender offering a rate of 9.5%, results in a total interest payment of Rs.43,98,066. That’s a flat savings of Rs.2,73,445.

On the other hand, if you are on the verge of repaying your home loan, it’s better to stick to your existing lender as you have mostly paid the interest on your loan.

How a Home Loan Balance Transfer Works?

Home loan balance transfer has a simple process. You need to make an application to the new lender with whom you want to transfer your loan. Today, most lenders offer an online facility through which you can apply for a home loan transfer. Also, to avail home loan balance transfer facility, you must have paid 12 EMIs without default and have a good credit score.

Along with your application, you need to attach/upload certain key documents such as photocopies of bank statements, income and identity proof along with address proof. Also, required are:

• A letter on the existing lender’s letterhead mentioning the list of property documents
• Outstanding balance letter
• Photocopies of property documents

The existing lender gets the unpaid amount from the new lender and you need to sign a new agreement with the latter. As a borrower, it’s essential for you to check the foreclosure charges while making a home loan balance transfer.

Other Advantages

While savingsin the long runisone of the major advantages of a home loan transfer, there are other benefits too. For example, Bajaj Finserv Home Loan Balance Transfer facilities offer you benefits such as:

• Top-up loans whereby you can avail a top-up loan on your home existing home loan without submitting any collateral
• 3 EMI holidays which helps you better manage your finances
• Part prepayment where you can prepay any amount to bring down the outstanding principal amount, subject to certain conditions

Also, with pre-approved offers from Bajaj Finserv on a range of loans including home loan, business loan, personal loan, etc., availing finance is quick and easy. You can know your pre-approved offer by sharing a few basic details.