5 Factors To Consider When Opting For A Home Loan Balance Transfer

At present, with a lucrative cut in the interest rate, borrowers may think of transferring their existing loan proceedings to another lending institution offering a better deal on the interest rate and other service terms. However, there are certain factors borrowers must give attention to while opting for a home loan balance transfer.

5 factors to consider when opting for a home loan balance transfer

Borrowers must consider checking the following factors before switching to a new lender:

1. The residual tenor of the current loan: Switching to another lending institution at the last stage of the repayment tenor will not be of great help to the borrower. Borrowers must opt for home loan balance transfer in the initial stage or make sure that the remaining repayment tenor is more than five years to churn out the most out of it.

2. New lenders terms and conditions: Borrowers must study the new lender's terms and conditions while opting for a home loan balance transfer to avoid paying hidden charges. One should analyse factors like transfer cost and terms of transfer to reduce the cost of borrowing.

3. Settle for an affordable interest rate: The primary reason why borrowers shift to a new lender is to cut down the interest rate on a home loan. Therefore, borrowers must negotiate with the new lender for the lowest possible interest rate before opting for a balance transfer. Lenders will offer lower interest rates looking at factors like the property in question, income profile, credit history, etc. An affordable interest rate and tax benefit on a home loan reduce the cost of borrowing.

4. Keep a check on credit rating: A decent credit score determines whether one is eligible for a balance transfer or not. A borrower with a poor CIBIL score cannot avail of the facility. One should try to keep a credit score of 750 and above.

5. Check the balance transfer fees: Borrowers should check the processing fee, application fees, inspection fees, etc., involved in the home loan balance transfer process. Borrowers have to pay some charge to both the existing and the new lender. So borrowers must estimate the entire cost of the balance transfer to evaluate whether it is more than the interest amount. 

To conclude, a borrower's decision to avail home loan balance transfer must be well thought out to dodge paying out extra and avail the facility with ease.

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