Investors are always on the lookout for lower interest rates, especially when they are trying to switch from one lender to another. A home loan balance transfer would thereby allow investors to have low-interest rates while switching lenders. How does this happen? The new lender sanctions the takeover of your home loan from your current lender. And in doing so, he/she pays the outstanding amount to the current lender.
As the handover happens and the required amount reaches the existing lender, he submits the documents and releases the property. In doing so, the current lender also issues a no-due certificate to the borrower. The loan documents, along with the no-due certificate are then handed over to a new financier.
Once this process approaches its completion, you as an investor would then have to pay the remaining Equated Monthly Instalments, more commonly known as EMIs to the new lender as per his or her interest rate norms. Due to this transfer, you get to close the old home loan account and create one with a different lender. This gives you access to better benefits, out of which the most important one would be lower rate of interest, lesser tenure, etc.
How would a home loan balance transfer benefit you then? What are its features?
- Lower interest rates:
The prime incentive for any investor to switch lenders, lower interest rates is what drives the change. It is one of the common reasons for lender switches. Reduction in rate of interest leads to lesser or lower EMIs. This subsequently means more monthly savings or your home loan getting paid off faster than you thought.
- Balance transfer
Also commonly known as BT, it remains equal to the process of obtaining a new loan. But this feature is something that cannot happen unless your home loan completes a certain period of time. When a new bank takes over your home loan from an existing bank, the outstanding principal amount is transferred to your existing bank. This process incurs no additional charges; however, this may differ in case of different financial bodies.
- Good repayment record with your bank:
What investors need to remember is that they need to have good repayment records with their bank. Having a good credit score and payment history smoothens the entire process of lender switch. It may also fetch you a lower rate of interest. If not that explicitly, you would receive a host of other benefits that you can rely on to switch lenders.
- Allows a top-up loan
A top-up loan is additional money handed over to the borrower at the current rate of interest. You can avail a top-up loan when you are switching your lenders. You can then use the money to pay off your immediate debts.
The benefits of a home loan balance transfer are many and varied, though we have just posted the most important ones here. It is now an easier process as banks have technologies aiding high-end transfers, thereby reducing the overall hassle of tons of documents passed around. Therefore, in order to enjoy lower bank rates or shorter EMI tenures, or both, you could opt for home loan balance transfer.