A Home Loan is the best available financing option to own a home. Various banks and NBFCs offer Home Loans with the option of applying for them online. To determine how much Home Loan amount you’re eligible for, a Home Loan eligibility calculator is the best tool.
If you are feeling the pinch of EMIs, you are most likely to scout for lenders who offer a lower interest rate. But before you decide to get on with transferring your Home Loan, you need to factor whether you derive any benefits. Other factors influencing your decision for loan transfer are outstanding loan tenure, transfer charges, and prepayment charges levied by the original bank.
It makes sense to initiate the transfer only when the benefits are more than the costs. You need to consider the long term benefits – low interest costs and a lesser repayment period which play a crucial factor in going ahead with the Home Loan transfer.
Savings in Interest
Most of you opt for a Home Loan transfer to make the best from a interest rate reduction. Even a 1% reduction in the Home Loan interest rate can get you substantial savings in the long run, because home buyers usually face a 15 -20 year tenure to repay their Home Loan. There is a reduction in your EMI as a result of the loan rejig and your whole debt undergoes restructuring.
Remaining Loan Tenure
If there is a substantial time period for the Home Loan account to get closed, then you earn a huge benefit in the long run- lower EMIs by virtue of shifting the outstanding loan balance at a lower interest rate.
However, if the tenure of the loan is nearing completion, then it is doubtful if you will stand to gain. The difference in interest will be only for a few years. And you have to pay the transfer charges. If the costs incurred is far more than the interest saving, there is no purpose served by transferring your Home Loan.
Transfer Fees
A Home Loan transfer entails transfer fees that has to be paid by the borrower. Whatever be the remaining tenure of the loan, transfer fees are applicable. While some banks charge a fixed amount as transfer fees, a few others charge it as a percentage, anything between 0.25% to 1%. If the transfer charges are more than the savings in interest, it is recommended to carry on with the current loan.
Transfer fees vary between banks and you need to choose a lender who charges minimum transfer fees.
Whether to effect a Home Loan transfer or not, it is best to make a cost benefit analysis. As long as you earn benefits in the long run, you can go ahead and transfer the home loan to a new lender.