Planning to Apply for a Home Loan Balance Transfer? Know When’s the Right Time - Loan Trivia

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Friday, 23 November 2018

Planning to Apply for a Home Loan Balance Transfer? Know When’s the Right Time

Since the introduction of home loan balance transfer, a lot of existing home loan applicants opted for this facility in order to lower down their debt burden. However, opposed to their expectations, they ended up paying more towards their loan compared to what they were liable for with their previous lender.

The said facility is, without a doubt, in favour of the home loan subscribers - accessible by those who want to utilize their benefits. But, it certainly doesn’t mean everyone is going to receive benefits by applying for this facility. As explained above, in some cases applying for balance transfer might increase your burden rather than reducing it. It all depends on at what stage of repayment process you opt for this facility. The timing is a crucial factor to consider while opting for balance transfer. The timing can make or break your decision i.e. increase or decrease your debt burden.

Lets understand this with an example. 

Case 1: Home Loan Balance Transfer opted during the early years of repayment process

During the first few years (around 4th to 5th year), most of the EMIs paid is used to settle the overall payable interest. Thus, if you opt for the facility in the early years, let’s say in the second year post the approval of loan, you might still save a hefty amount.

Case 2: Home Loan Balance Transfer opted during the later years of repayment process

On the other hand, opting for the said facility during the later years (10th or 12th year) post the disbursal of loan, most (almost 80%-90%) of the payable interest is already settled and only the principal component is left. In such case, switching your lender isn’t wise at all since balance transfer is almost like availing a home loan again, after paying all the charges such as processing fee etc. again.

Thus, whenever planning to apply for home loan balance transfer, always gauge the conduciveness of your decision.

Reference Read:
When is the Right Time To Transfer your Home Loan and Avail Benefits

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