Must read on Home Loan Balance Transfer

Home loan industry in India has come of ages. Consumer is King. And definitely, if you are the one with sound financial background and impeccable credit history you can strike a better deal with the banks in terms of interest rates and other payment conditions.

Interestingly, the same is applicable on those, as well, who have already availed a loan from a bank. Near about all the major public and private sector banks are now offering the option of 'Balance Transfer' on housing loans

What is Balance Transfer all about?

There are times you find that the interest rate on your home purchase loan that you were paying at the rate of 10.5 per cent per annum was quite high in comparison of 9 per cent offered by some other bank.

In this case you can trigger off the balance transfer option with your existing bank, under which the unpaid portion of your home loan would get transferred to your desired bank, thereby taking benefit of the difference in the interest rates.

Things to take care of:

• Tenure of loan: Ideally, you should consider taking the balance transfer option when the remaining part of your payment period is more than 5-years.
  
  There is no point in transferring the home loan from one bank to another if you end up paying pre-payment and other processing charges even more than the difference of amount you had to pay towards interest in the normal course.
  
  
• Pre Payment Charges: Banks like SBI, IDBI and ICICI offer benefits like payment of the pre-payment charges to your existing bank. So you must confirm the same with the new bank that are they ready to deal with this matter or not.



• Additions in the loan amount: You must confirm that the amount of your home purchase loan is perfectly in line with the balance you had in your previous bank. It may happen that your new bank pays all pre-payment and processing charges on your behalf and add the amount later to the principal amount of your housing loan.

In such case, you have to suffer the impact of compounding, which does not favor you in the long run.

Final Word:

Seeking balance transfer option needs the similar degree of caution and study that you undertake while taking home loan. And of course, you can save a considerable amount of interest charges under this option once you strike the right chord!

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