The housing loan market in India registered a 9.6% year-on-year growth in December 2020. The unchanged policy rate has been exponential in this rise, keeping home loans affordable. This trend is likely to continue in FY2022 as well.

Since any minor adjustment in the interest rates here can significantly affect home loan borrowing costs, access to facilities like the transfer of home loan balance can bring additional savings.

Nonetheless, if timed properly, a move like this can bring a plethora of benefits. Hence, before opting for a balance transfer of a home loan and maximising its benefits, here are some pointers to remember.

Point to remember for a timely transfer of home loan balance

  • When there is a chance of an interest rate reduction

Interest rate fluctuations can significantly affect an individual’s total housing loan debt. Hence, it is logical to go for a balance transfer while there is a possibility of reducing interest rates in the near future.

In this regard, another point that home loan borrowers need to consider is the financial institution they opt for. A financier that offers the most competitive home loan interest rate should be the pick as it can significantly reduce one’s debt. It is one of the main reasons to refinance your home loan now.

  • When the cost benefit analysis gives an encouraging outcome

Performing a cost benefit analysis is imperative before considering a home loan transfer. Since opting for this refinancing facility includes foreclosing the current loan and starting a new one with a separate lender, it includes additional costs.

Thus, individuals should consider these additional charges and compare them against the savings that a loan transfer offers. It will help borrowers to understand the final savings that they are making. Individuals can take the assistance of a home loan EMI calculator for this purpose.

For instance, a balance transfer costs you Rs.10,000 in additional charges, and you are making a saving of Rs.20,000 in total. Therefore, your ultimate savings from this move is Rs.10,000, which is not a lot. In such cases, going through this hassle may not be worth it.

  • When the repayment is in its early stages

The primary purpose of a balance transfer is to avail of an affordable home loan interest rate that reduces the total interest burden. Therefore, if a borrower decides to shift the credit in later stages of their loan repayment when the lion share of interest is already repaid, it will not make any sense.

Instead, one can opt for this refinancing in the early stages, preferably after the initial few years of repayment. It is because; a longer tenor will leave room for better savings on interest payment of a housing loan.

  • When there are improved loan terms on offer

In addition to the interest rate and tenor, a home loan includes several other terms. Therefore, opting for better loan terms with another financier can be a reason for home loan refinancing.

For example, repayment options can be one such reason. Your current lender perhaps is not offering a part pre-payment facility or charging a significant fee for foreclosure. At the same time, another lender is extending a part pre-payment option and not levying any fees for foreclosure. Therefore, the second financier can be an ideal choice to reduce the home loan repayment burden without bearing any extra cost.

  • When there is a top-up loan facility available

A top-up loan on home loan facility can be another reason to avail a home loan balance transfer. Even though this point is not exactly aligned with the timing, it helps borrowers access additional funds over their current housing loans. Moreover, such funds come with no end-use restrictions, and one can use these funds to fulfil a wide range of financial needs.

Additionally, the interest rate here is close to that of a housing loan; hence, it remains affordable. Also, the tenor here is aligned with the actual loan, so the repayment remains hassle-free.

Also, leading financial institutions extend pre-approved offers that make the application process quick and stress-free. Such offers are available on multiple financial products like home loans, loan against property, etc., and borrowers can check their pre-approved offer by submitting essential contact information.

Transfer of home loan balance is a convenient way to reduce liabilities and avail better terms. Now, once borrowers have recognised the correct time for it, they can get in touch with a financier of their choice and initiate the formalities.