Commercial banks and housing finance companies (HFCs) offer mortgage loan contracts to potential borrowers starting at an interest rate of 6.70% * per year. Borrowers with active mortgage loan agreements repaying the loan amount at a higher interest rate should consider an alternative method. This is because an alternative method helps to cushion the burden of repaying the loan at a higher cost and it also saves money for future needs.
Customers can transfer their home loans to other lenders to take advantage of better terms of service and lower interest rates. A mortgage balance transfer is an effective alternative to the complementary loan option. This ensures that when you transfer your remaining loan amount to another lender, you benefit from lower Equivalent Monthly Payments (EMIs). In addition, you benefit from low interest rates on home loans.
What is a mortgage balance transfer?
A home loan balance transfer, also known as loan refinancing, or balance transfer, is the procedure you take to transfer your current mortgage amount to another lender, namely the bank or an HFC. In addition, you benefit from low interest rates on home loans throughout the life of the home loan. It works when you have an outstanding home loan with a lender and then go for a home loan balance transfer.
After meeting the eligibility criteria, the current lender allows you to transfer the outstanding mortgage amount to a new lender of your choice. The new lender will demand a drop mortgage interest rate, from which you will benefit if the procedures for transferring the balance of a mortgage loan are followed accordingly. This process is what lenders and borrowers call “home loan balance transfer” or “loan refinancing.”
This process allows borrowers to escape the high interest rates that come with a home loan. Meanwhile, choosing a smart lender is also a smart move. With a resourceful lender promising low interest rates and a less stressful EMI payment schedule, you can breathe easy. Meanwhile, the home loan balance transfer requires a considerable amount of money to be completed. So, we want you to be sure that Balance Transfer is what you want to use. The main reason borrowers opt for a home loan balance transfer is to benefit from a lower interest rate on their outstanding home loans.
Typical interest rates on home loans range from 6.70% to 12%. So, if you don’t want to argue with your lender, possibly negotiate a significant drop in interest rates, then consider a mortgage balance transfer.
Features of mortgage balance transfer
Here are some essential features of mortgage balance transfer.
- It allows you to transfer the remaining balance of your current home loan from one lender to another.
- A nominal fee (a percentage of the mortgage loan outstanding) is paid to the new lender as a processing fee.
- At the end of the home loan balance transfer, you owe the new lender the loan amount you transferred plus certain applicable fees; however, you owe nothing to the previous lender
Reasons to request mortgage balance transfer
Some of the reasons for a mortgage balance transfer include:
- You want to ease the burden of EMI payments at a high interest rate.
- You want to reduce the amount of money in the form of interest on the home loan.
- You want to enjoy better benefits and privileges than those offered by a new lender.
Read on to learn more about the factors to consider before transferring your home loan to a new lender. Of course, you may no longer want to guarantee high interest rates and are considering a mortgage balance transfer. However, we urge you to know the factors that come into play, so that your eventual decision is no regrets.
Factors to Consider Before Transferring Your Home Loan to a New Lender
Factors to consider before transferring your home loan to a new lender are:
- Make sure that your new lender’s promises of reduced interest rates and additional benefits are legitimate. It is easy to be fooled by attractive promises, which is why we recommend that you make sure that the new lender does what is advertised before opting for a home loan. A thorough background check of the lender will resolve this issue.
- Consider how much time you have left to pay off the current mortgage. Before you request a home loan balance transfer, make sure you haven’t reached the latter part of the loan term. It is possible to have a few years to repay your mortgage when you have made the interest payment at the beginning of the mortgage term. Asking for a balance transfer during the later stages of your loan life is a bad decision and you risk increased interest payable. We recommend that you consider this carefully before proceeding with a balance transfer.
- Consider the cost of a mortgage balance transfer. Before requesting a balance transfer, be sure to compare the applicable fees that accompany the process. Only complete the balance transfer if you are sure the move won’t hurt you financially. These costs include stamp duties, documentation costs, etc. When these fees take over from you, reconsider your balance transfer.
- We advise you to carefully read the general conditions of the balance transfer of the mortgage loan. Make sure that you are not drawn into an affair that will overwhelm you even more. We ask that you only proceed with the balance transfer when the terms and conditions of the new lender appear to be positive.
Now that you know what a mortgage balance transfer is and the factors to consider before deciding to move, we ask that you weigh the factors carefully before moving forward. Check the features online on the lender’s website to make an informed decision.