Rising Home Loan Rates: How Home Loan Balance Transfer can Help You

A home loan is one of the most crucial financial commitments that one makes during their lifetime. This is because a home loan is generally a big-ticket loan that spans out over a number of years. For this reason, it’s important to evaluate your options and make a wise financial decision.

Many of us stick with our home loan provider for the duration of the repayment tenure. However, it might do some of us well to switch our home loan provider. There are a number of reasons why you might think it’s in your best interest to change your home loan provider. This can include high interest rates, repayment tenure extensions, top-ups, loan providers not acting in good faith, etc. Switching your home loan from one provider to another is known as housing loan balance transfer, or HLBT.

Contrary to popular belief, switching your home loan from your existing home loan lender doesn’t have to be a cumbersome process. When you switch your home loan from one partner to another, your new lending partner pays the outstanding balance on the home loan. Now, your existing home loan account is closed. Subsequently, a new home loan balance transfer account will be opened with your new HLBT provider.

Getting your home loan transferred is now easier than ever. Many financial institutions offer online home loan balance transfers and come with affordable home loan balance transfer interest rates.

So, why should you choose a home loan balance transfer? Here are some benefits of an HLBT:

1. Lower Interest Rates

One of the most common reasons for HLBT is lower home loan interest rates. What seems like a minuscule change in the interest rate could actually end up costing you in thousands and sometimes, even lakhs. If you find that the interest rate offered by your home loan provider is higher than the industry average, it might be a good idea to have a word with them regarding the same. You can try negotiating the interest rates and if your loan provider is unwilling to budge. Then, you should opt for an HLBT.

Here’s an illustration to help you understand the effect of interest rates on the EMI payable:

Scenario 1:

Let’s assume that you’ve taken a home loan of ₹40 Lakhs, for a period of 20 years at 10% per annum. Then your EMI will be ₹38,600.87 while your total interest payable would be ₹52,64,209 and your total amount payable would be ₹92,64,209.

Scenario 2:

Let’s assume that you have taken a loan of ₹40 Lakhs, for a period of 20 years at 9.5% per annum. In this case, your EMI will be ₹37,285.25 while your total interest payable would be ₹49,48,460 and your total amount payable would be ₹89,48,460.

A difference of just 0.5% in interest rate can help you save ₹3,15,749 in interest payments.

This is why it’s important that you shop around to find the lowest interest rate to help you save money in the long run.

2. Extended Home Loan Tenure

Your home loan repayment tenure is another important factor when considering an HLBT. A longer repayment period can help you reduce your monthly repayment burden. This can be especially beneficial if you are tight on finances.

Not a lot of home loan providers allow for home loan tenure extensions. If this is the case with your home loan provider, you can consider an HLBT. While a tenure extension may be your primary need, you can also get added benefits like reduced interest rates and better terms.

3. Top-up Options

Another benefit of an HLBT is the top-up facility offered by lending partners. If you do opt for an HLBT top-up, you will get an additional amount on top of your existing loan. The nifty part of an HLBT top-up is that many lenders will not impose end-use restrictions on your top-up. In simple words, this means that you can use this top-up amount as you please.

Typically, this luxury is only afforded to personal loan borrowers. But, the interest rates on personal loans are much higher than HLBT interest rates. Thus, this top-up facility is a great way for you to get a lower interest rate borrowing without end-use restrictions.

4. Favourable Terms

Different lending institutions offer different terms on their home loans. Some terms may have seemed fine to you when you decided to take a personal loan but may not be favourable for you now. This is very common, given how long the repayment period for home loans are. It is pretty unrealistic to expect that your financial needs wouldn’t change.

If you are unhappy with your lender’s terms, you needn’t stick with them. You can simply opt for an HLBT that will help you access better terms. This can include lower or even, zero prepayment and foreclosure charges.

5. Interest Rate Type Revisions

There are chances that you may have opted for floating rates or fixed rates without much knowledge or even, one choice may have seemed better than the other at the time. However, as times change and the economic climate undergoes changes, one option may be a better option.

If you feel like one rate type is better for you than the other but your current lender is unwilling to change your interest rate type. Then, you can switch to a different lender that allows for an interest rate type change through an HLBT.

6. Better Service

Another common reason for which people choose to have their home loan providers switched is poor service. If you find that your home loan lender is unresponsive or provides subpar service, then you can consider switching to a different lender through an HLBT process. By doing this, you might also get lower interest rates and better terms, which is always welcome!

A home loan balance transfer can be beneficial in helping you access lowered interest rates, more favourable terms and better service. This can help you save a lot of money, effort and help in making the entire home loan process simple and seamless.

However, just like with any other financial decision, it’s important that you exercise due diligence. Shop around, research the interest rates and terms offered by other lenders and then make your decision!