Home loans are long time commitments. Hence an average Indian would spend almost half his working life repaying a home loan. Interest rates on home loans fluctuate with each year. So it is highly possible that you might have signed up for a home loan at higher interest rate and now the market rate has reduced.
Eg: Mr. X took a home loan at 11.50% in the year 2010 for a period of 20 years. Now in 2015, the rate of interest is 8.50%. So that means you are repaying your home loan at a higher rate of interest when you could have been paying lower EMI.
What can you do in such a situation?
Balance transfer. A home loan balance transfer allows you to switch your home loan from existing bank to a new bank. This means you can avail all benefits that the new bank is offering. Mostly customers would switch to a new bank only because they are being offered lower interest rates, better terms and conditions.
What are the features of a balance transfer?
A housing loan balance transfer has multiple features like:
Lower Interest rates – The first most important reason why a customer would move to another bank is due to the new bank offering lower interest rates.
Top-up to outstanding loan amount – The next best reason a customer would opt for a balance transfer is the new bank offers you a top up loan amount above the current home loan amount. This means you get extra funds at lower rates.
Reduced or zero hidden charges – New banks would offer better terms and conditions than your existing bank as they want a new customer. Hence they would reduce or exclude all your hidden charges.
Customized repayment options – New banks will also offer better repayment options and benefits like interest free holiday and many more exciting offers to ensure you apply for a home loan balance transfer from them.
Prepayment is allowed – In order to ensure that your EMI burden falls sooner than ever, Banks provide prepayment option to their customers if they choose to shift their home loan via balance transfer. Usually they would not charge any fees when you transfer your home loan balance to the new bank.
These features of balance transfer help you in saving a lot of money. Hence please read all loan offers carefully. Research on Banks that are providing better deals so you can transfer your existing home loan to their bank. Apply via Ruloans and compare loan options from more than 20+ Banks and NBFCs.