The Indian real estate market is growing at a tremendous pace. It is expected to reach Rs. 7.10 Lakh Crore by the end of 2030, while contributing to almost 14% of the country’s total GDP.
A significant number of citizens, usually from suburbs and towns across India, are moving into Tier-1 and Tier-2 cities. This has fuelled the need for housing units as well as credits like home loans. A substantial number of prospective buyers are opting to procure residential properties with assistance from similar credit schemes.
A quick look into the Indian real estate market –
- 193,600 new units were inaugurated in the top 7 cities across India, a 32% growth over 2017.
- 46.43 Lakh existing home loan accounts across various financial institutions according to a recent RBI study.
- 8.10% is the lowest home loan interest rate offered by certain financial institutions in India.
The demand for housing credit has increased in recent years thanks to longer repayment tenors, substantial loan amounts, affordable EMIs, and the facility to avail home loan transfer. A borrower can easily transfer their existing line of credit to another financial intuition that offers feature-rich home loans at a lower rate of interest.
Recent studies have shown that an increasing number of borrowers are opting for a home loan balance transfer to benefit from lower interest rates and/or additional features offered by another lender.
What is a home loan balance transfer?
A home loan balance transfer is a process where an individual switches the loan from a particular lender to another. Upon the transfer, the outstanding loan balance is repaid by the new lender, and the borrower starts paying the EMIs to the new organization. Moreover, one can also avail a top-up loan for additional funds to invest in real estate or any other personal or professional requirement.
However, there are several things to know about a home loan balance transfer before opting for it.
7 Things to consider before a home loan transfer –
- The cost of a home loan takeover – Financial institutions usually include a processing fee (sometimes referred to as transferring fee) when borrowers opt for a loan balance transfer. Usually, both the existing and new financial institution charges processing fees.
It is necessary to calculate the fees as these might increase the payable amount by a significant amount.
- Interest rate regime – Different financial institutions offer different interest rates on home loans. For any borrower, the most important reason to opt for a home loan takeover should be to benefit from lower interest rates.
- Remaining tenor – Financial experts suggest avoiding a home loan balance transfer if the credit is nearing its end of the tenor. By then, the borrower has paid most of the total payable interest on the home loan and is repaying the principal. It is best to use an online home loan transfer calculator to determine the best time to transfer the loan account.
- Eligibility – It is necessary to meet the minimum eligibility requirement imposed by the new lender while opting for a balance transfer. The mortgaged property’s value, CIBIL score, repayment capability, etc. are considered while applying for a takeover. One can also use an eligibility calculator before applying to ensure they meet all the requirements.
- Top-up loan – Financial institutions are also likely to offer a top-up loan to borrowers willing to transfer their existing loan account. It is a facility that allows borrowing a certain sum above the existing home loan amount. It can help pay for additional charges related to the loan balance transfer as well as any other financial requirements. Note that top-up loans do not come with any end usage restrictions.
- Foreclosure – Borrowers planning to foreclose their credit can also benefit from a home loan transfer, as the interest of the credit is reduced after the takeover. Ideally, one should foreclose a credit only when the principal and interest component of the credit is balanced.
- Time is taken for the transfer – It can take approximately 5 to 10 working days to complete a home loan takeover. Refer to leading lenders for the least turnaround time other than the easier process.
These are some of the most important things to keep track of while applying for a home loan balance transfer. Understanding the details of this process and selecting the correct lender will help an individual to save a significant amount during his/her loan repayment tenor.