Category Archives: Home Loan Balance Transfer

28 Jan

Why Is Everyone Talking About Refinancing the Home Loan?

Refinance your Home Loan

It is the time in markets where there is hope of good and cheering is reigning supreme. It is also the time when many look ahead for interest rates to come down. In such circumstances, refinancing your existing mortgage, also known as balance transfer of home loan, can be the alternative that would figure top in your priority list. And before you speculate on what should be your first move, here are certain reasons why you should go for it:

Saving of time and money is good sufficient reason to go for refinancing the home loan. Let us understand this with an example. Let’s say your home loan outstanding as of today is Rs. 50 lakh and the current interest rate is 11.5%. Then in that case you are paying an equated monthly installment of Rs. 53,322 and you are still 20 years away from the debt free status. But if you refinance the home loan at 8.65%, you will be paying an EMI of Rs. 44,307 – saving of Rs. 9015 per month. On the other hand, you can also keep your EMI constant. If you choose to pay an EMI of Rs. 53862, you will be debt free in just 16 years, a saving of four years. Put simply, you benefit in the process.

This saving is fairly significant as saving some money now amounts to creating wealth in the long-term. If you have five years to become a loan-free, you should believe of opting for refinancing. After all, it is your hard earned money and longer the time you pay back your home loan more money in interest payments. Second and the most significant rule is the current rate of interest on your home loan. If the current rate of interest payable on your home loan is 100 basis points more than the interest rate on offer in the market, you should think refinancing the home loan. If you have a home loan outstanding in your name, and any of these two conditions is met, it is the time to act.

So, what is stopping you from doing this? Is it ignorance or misplaced fear? Many a time borrowers are not conscious that the banking regulator RBI takes a decision that serves them best. Take for example, the abolishment of prepayment penalty on the floating rate home loan. This means that you are free to move to any other bank or home loan lender. However, your new bank may charge you some processing fee to cover the cost of due carefulness, it does while giving you the home loan. To that extent you have incurred one- time cost, which is typically in the range of 0.5% of the loan outstanding. Many banks put a cap on such charges say Rs. 25000. Some banks to waive it to lure good customers particularly if the customer has a credit score or CIBIL score of more than 750. If you have a very good CIBIL score, anywhere between 750 and 900, you stand to save on these costs.

If you do some homework about the prevailing interest rates offered by banks, you will certainly find some good deals. As interest rates are on the way down, you stand to advantage. If you refinance your home loan now, you are extremely likely to save more. So, focus your energies on these to make the most of the present situation.

11 Nov

Recognize Home Loan Balance Transfer!

A Home Loan balance transfer (also known as refinancing or balance transfer) is an alternative that most persons choose, to acquire the benefit of lower interest rates in the marketplace. More often than not, an accessible borrower, who is regarding 2 or more years into his loan tenure, does not get the advantage of reducing interest rates in the market. That is, if he opted for a fixed interest rate. Such persons could have a conversation with their bank and re-consult their interest rate. Citing a first-class repayment track record, among added things, could help. If the bank is not agreeable, they could then adapt to another bank or financial institution which offers a lower interest rate for Home Loans.

The Transfer Process

First of all, you will need submitting a letter to the available lender, requesting a transfer. Based on your ask for, the lender will give a permission letter or No Objection Certificate (NOC) along with a statement mention the outstanding loan amount. You require giving these documents to the new lender, who will then transfer funds to the old lender for an account closure. Once this transaction is done, your property documents will be handed over to the new lender. The remaining post-dated cheques that you might have given to the old lender will be cancelled.

A Home Loan All Over again

Remember that for Home Loan balance transfers you require go through all the procedures concerned in a Home Loan, once again. These contain a credit assessment, legal confirmation of property documents and technical evaluation with the new bank. The loan will be permitted only when the bank is satisfied with the verification’s.

The lender that you are shifting to more often than not offer you a loan based on the current Home Loan rates that their customers take pleasure in. You can, of course, discuss and make sure if they will give you lower rates.

Take Charges into Account

Some banks charge a down payment penalty for a balance transfer. This can differ any place between 2%-5% of the principal outstanding amount of the loan and depends on your lender. However, lately, many institutions and some banks appear to be waived this off for their customers. Make sure with your bank and try to discuss a waiver if charges are appropriate. Also, note that you may have to pay a processing fee to the new lender. This can vary from anywhere between 0.5%-1% of the loan amount, even while nearly all banks confine this amount to Rs.5000. You could ask your new lender to waive this off.

Take these charges into account when you are comparing lenders before initiate your balance transfer. If you feel there is a major amount of interest to be saved from the move about, then you can create a profitable switch.

Apart from saving on interest, there are a few added reasons why you could think switching to another Home Loan, these include:

Bank makes a fuss: You may want to re-negotiate definite terms and conditions with your bank. For example, you may wish to make bigger the tenure of your loan to lower your EMI. In case your bank does not have the same opinion, it would create sense to change lenders.

No Top-up: The costs linked to the property that you purchase may have gone up considerably. Allowing for this, you might want a top-up loan to modernize your home or meet any other requirements. If your lender is not open to as long as such a loan, you could consider switching to another lender.

Things you should think

It is always improved to change early on throughout the loan tenure. This is since interest will still be a major part of your EMI and switching would be signifying savings.

Get an acknowledgement from your present lender for the belongings, documents that require to be sent across. More frequently than not, the credentials are not sent on time to the new lender, with no a bit of a shove from the borrower.

Keep in mind that a loan change will not be likely if you have been uneven with your loan repayments.

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