Top Reasons to Opt for Home Loan Balance Facility

A home loan is nothing but a long-term commitment that usually ranges between 8 years and 30 years. However, it does not mean you require continuing your home loan with the same housing finance company (HFC) or bank. Yes, you read it right. It is prudent to transfer your existing home loan to another lender in case they are providing a lower interest rate and other important benefits, which you are not satisfied with your current lender. Are you still unable to understand? Consider this example, suppose you have been serving a Yes bank home loan at an interest rate of 15 per cent per annum, and however, you come across another lender, i.e., Aditya Birla home loan offering a lower interest on a home loan to you, i.e., of 8 per cent per annum. So, here in this case, if you transfer your Yes bank home loan to Aditya Birla home loan, then you would be able to save substantial interest constituent. Also, this switch to another lender will also allow you to lower your overall loan cost. 

What’s meant by a home loan balance transfer?

Home loan balance transfer also called HLBT is shifting of your outstanding home loan to a distinct lender for a better interest rate and other crucial benefits. Technically, when you opt for the transfer option from your existing home loan to another home loan lender, the new lender pays off all the unpaid home loan balance to your existing bank and your existing home loan account is closed. Simultaneously, your new account for a home loan begins with the lender to whom you have shifted your account, where you will be paying comparatively less interest rate. 

Nowadays, there are many banks as well as HFCs or housing finance companies that are providing the home loan balance transfer option with various benefits and offers. An increasing number of lenders are interested to avail the pre-approved balance transfer option to save higher interest costs. Although all such offers and promotions are targeted to shift you as a borrower towards them instantaneously, you must ensure to check whether it is a prudent choice for both parties and read the terms and conditions well.

What are the important home loan balance transfer benefits that you must be aware of?

Lower rate of interest

A lower interest rates are one of the major advantages of choosing a home loan balance transfer. If another housing finance company or bank provides a lower rate of interest than the existing lender, it must be considered for sure. Every minor difference of 50 basis points in the rate of interest tends to make a massive difference in the thorough amount that you pay. Additionally, it also assists to bring the monthly burden down too, i.e., lowering the EMI. 

Just suppose you hold an outstanding home loan equaling Rs 60 lakh with XYZ bank. The interest rate is 9.75 per cent per annum and the rest term is twenty years. 

Case no. 1 – if you decide on continuing with your existing lender, your expenditures would be – 

Case no. 2 – If you decide to go for the home loan balance transfer option with ABC bank, which is providing you a lower rate of interest, i.e., a decrease in interest rate by 1.50 per cent than your prevailing home loan lender, your expenses would be.  

Thus, by lowering your interest rate by only 1.50 per cent, you can save Rs 13.88 lakh.

Higher loan repayment tenure

If your current EMIs are not affordable for you, a balance transfer option can provide you with a higher repayment tenure by lowering your loan EMI. Suppose your rest of the home loan repayment tenure equals 10 years but owing to specific reasons you may not afford the loan EMI and are looking to lower the same. Then here in this case you can consider opting for the home loan balance transfer option; the lender to whom you have transferred your home loan can provide you with a higher loan repayment tenure, and you can now comfortably repay your loan proceeds. 

Also Check and Apply for: Aditya Birla Home Loan

The choice to go for a top-up home loan option

The next crucial benefit of a transfer option is that while transferring the home loan, you as a borrower can avail additional amounts too with the existing lender. This additional amount is known as a top-up home loan option. A top-up home loan option is usually limited to 25 per cent of the outstanding proceeds that you may be transferring. This can be taken up at a lower interest rate and used for any purpose as per your requirement like home renovation, your child’s higher education or marriage, a trip abroad, etc. 

For instance, Ms Sudha was looking to make a home loan balance transfer equaling Rs 20 lakh. And she also requires Rs 4 lakh to purchase new furniture at her home. With the home loan top option that is available with the transfer option, it is simple for her to get an additional loan at a relatively lower rate of interest. However, with a zero top-up option, Ms Sudha may require availing a personal loan or a loan against a credit card that comes with a considerably higher interest rate. 

Better loan terms and conditions

All the home loans provided by the HFCs, and banks come with unique features as well as benefits. In case you are unsatisfied or need some particular features that your prevailing lender does not provide, you may consider switching your loan to a better lender. However, when transferring your home loan outstanding loan proceeds, ensure that the lender provides you with the features you need and even if it is financially advantageous to you. 

For instance, if your prevailing lender has higher fees and charges attached to foreclosure and prepayment of a home loan, then you can factor in the home loan balance transfer option to the lender of your choice who does not incur any fees or has minimum fees for foreclosure and pre-payment along with the lower rate of interest.