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Home Loan Balance Transfer: How it Works?

· Home Loan Transfer

Home loan balance transfer has emerged as a lucrative solution for subscribers paying a high interest (higher than what’s practical) towards their housing loan. This feature allows people willing to lessen their burden by transferring/ getting their home refinanced by a new lender offering the loan at lower interest rates. Getting into details, a home loan transfer can be divided into multiple stages.

Stage 1: Apply for balance transfer and ask your existing lender for foreclosure.

Stage 2: Use the amount borrowed to foreclose your previous loan and start paying the EMIs of your new loan.

This is how home loan balance transfer works. Now, let’s move on to what makes the said facility work in your favor? Since balance transfer is refinancing of a home loan, all the charges paid while availing a housing loan in the first place have to be paid again. Thus, apart from the profits gained due to interest rate difference between your existing and new loan, there are other things you have to consider in order to benefit from it. To start with, you must consider:-

- Timing of Balance Transfer: Even though the new loan is offered at a lower interest rate, balance transfer wouldn’t make sense if most of the interest part of your existing loan is already paid. Switching your lender is beneficial only during the first two to three years of loan approval. Post that, you’re just adding to your burden.

- How much You’re Saving: This can be easily calculated by doing some maths, not tough though. You have to calculate the cost of transfer and then the actual profits you make by switching your lender. This would give you an idea of whether your decision is beneficial or not.

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