One of the remarkable features of availing a home loan is that borrowers can opt for a home loan balance transfer. Through this balance transfer, borrowers can shift their outstanding loan principal to a new lender offering lower interest rates and better loan terms, thereby reducing the cost of borrowing.
Here are a few things that borrowers should consider while opting for a home loan balance transfer:
Residual loan tenor: Availing home loan balance transfer facility during the last stage of loan tenor is not worth it. It is recommended to opt for balance transfer in the initial stages of the home loan to make the borrowing cost-effective.
Cost of refinancing loan amount: Another vital factor borrowers must consider is the set of charges associated with transferring the loan amount. If the charges outweigh the savings on the lending rate, it is not feasible to refinance.
Negotiate for nominal interest rate: Before refinancing the loan amount, it is prudent to negotiate with the existing lender to reduce the interest rate. The shifted loan amount is considered a new loan application and takes some time to process. Moreover, the current home loan interest rate is at an all-time low. Hence, it can be effective to negotiate with the existing lender.
Apart from reaping the benefits of a home loan balance transfer, borrowers can also enjoy home loan tax benefits to claim a tax rebate on the interest rate.
To sum up, home loan balance transfer proves to be effective when borrowers pay higher interest rates to their existing lenders. However, borrowers must note the above-mentioned factors before availing it as it will help them save substantial funds.
Read More: Is Refinancing a Home Loan Good for People During Covid-19 Crisis?
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