Ever since home loan balance transfer came into existence, a lot of existing home buyers applied and got their home loan refinanced. However, only some of them are happy with their decision, others are regretting their decision. Why? A home loan balance transfer is a conducive feature - highly suggested for home loan subscribers paying high-interest rate towards their home loans. However, the facility is suggested only in certain conditions:-
- The loan repayment process should be in the initial years; 6 months to a year is acceptable, more than that means most of the applicable interest is already paid. Hence, switching the lender at this stage would only add to the burden.
- If the interest rate offered by the new lender is very low compared to your existing lender. The difference should be at least 3%-4%. If it’s not like that, switching lender isn't advisable.
Moving ahead, to further find out if a home loan balance transfer is worth it in your case or not, you can measure the profitability quotient using the following factors.
The interest rate, would it make a difference?
As said above, in order to make your decision to switch lenders worthwhile you must look for an interest rate difference of at least 3% to 4% per annum. Otherwise, you’re only adding to the burden.
How many EMIs have you paid already?
How many EMIs have you paid already to your existing lender would decide how much of the interest is already paid and if switching lender is beneficial or not? A lender, in case of any loan, structures the EMI in a way most of the interest component is settled in first few years of repayment process.
How much are you saving?
Lastly, use the EMI calculator and find out how much interest you are yet to pay to the existing lender and how much will you have to pay to the new one. Once you have the numbers, find out if you are saving anything. Also, don’t forget to consider the processing fee and other charges you’ll incur while switching lenders.