Right now, home loan interest rates are at their lowest level in decades. It is time for you to file for a house loan balance transfer, nevertheless, if you are still paying your EMI payments on your mortgage at the old rate.
What is a balance transfer on a mortgage?
A house loan balance transfer is switching banks for your mortgage in order to benefit from a reduced interest rate, better terms, and other benefits.
High-interest rates have a direct influence on your finances and can impede your ability to prosper financially. Being in a lot of debt could also be stressful. Your only hope of surviving may be to foreclose on your mortgage before the tenure period has passed.
However, not everyone can easily foreclose a sizable debt. In this situation, selecting a home loan balance transfer might be beneficial and cost-effective for you.
How does transferring a balance operate?
During a home loan balance transfer, the remaining loan balance of your existing mortgage is transferred to a new lender. The new lender also gives you money to pay off your previous loan.
For this, the borrower must file an application asking for a balance transfer to both his present lender and a new lender. The remaining balance will be paid to the current lender if the new lender accepts the existing mortgage, and a new loan account for the same amount will be opened with the new lender.
As soon as the current lender receives the overdue amount, the property documents must be released and a no-due certificate must be handed to the borrower.
The borrower is required to deliver all of this supporting documentation to the new lender and make all outstanding EMI payments at the rates set forth by the new lender.
Benefits of transferring your mortgage balance
Lower the interest rate and EMI as a result.
One of the key benefits of choosing a home loan balance transfer is the lower home loan interest rate. When you are paying a higher interest rate on your loan and other lenders are offering the loan at a cheaper rate, opting for a balance transfer works in your favour and helps you to convert your loan to the lower rates with a new lender.
Your EMI is further reduced as a result, saving you a significant amount of money each month.
gives you a better chance of getting a loan.
Many lenders provide a range of terms for their loan alternatives. Additionally, if you have taken out a house loan with unfavourable conditions, shifting your loan to a lender who is offering the same loan at terms that are more advantageous to you can help you.
Charges for prepayment and foreclosure
The Reserve Bank of India banned foreclosure fees for housing loans with floating interest rates in a 2012 directive. For house loans with a fixed rate of interest, banks are allowed to charge a par-closure fee that can range from 2% to 4% of the outstanding balance.
Therefore, borrowers who are paying a floating rate of interest and want to prepay or foreclose on their mortgage should without a doubt do so.
Additional loan amount
One more advantage of house loan balance transfers is the availability of top-up loans. You can receive some money in addition to the total that is still owed when you transfer your balance.
Before moving your money, there are a few things you should be certain about.
Make sure the remaining repayment period does not exceed five years.
Check to see if you are still making your EMI payments on the present loan.
Make sure you have all the property-related papers ready.
Transferring the balance of your home loan is a great way to reduce your debt and EMI stress. Home loan balance transfers can also assist you in receiving better loan terms, a top-up loan, a lower interest rate, and in some cases, specially tailored offers.