Extending Home Loan Tenor with Balance Transfer Facility
Narayan Murthy once said, “Love your job and not your company”. This famous saying does not pertain to only job scenario, What he meant was love your commitment and honor it, but you can always look for better options elsewhere. Coming into the world of banking and finances, this saying has an even deeper meaning. Let us try to understand it from the point of Home Loan Balance Transfer.
We are very emotional when it comes to the topic of our dream – our house.
We will be grateful to the banks/financial institutions that have helped us financially in order to achieve this dream.
We are happily paying our EMI’s and repaying our debts. But there is always better options and improvement in the current system.
We might have taken Home Loan from a bank which at that point of time was providing the lower rate of interest and probably higher quantum, but we must keep an eye over the market and look for banks which are providing better and lucrative schemes for the outstanding balance transfer of the House Loan.
What do You mean by Balance Transfer of a Home Loan?
Suppose a Home Loan of Rs.10.00 lakhs has been availed for 10 years. Now after 5 years, the amount remaining is 6.50 lakhs. This is your outstanding balance of a Home Loan.
By Home Loan balance transfer facility, we simply mean the transfer of loan from one bank to another.
Continuing with the above-mentioned analogy, the Housing Loan was with bank ABC with a balance of Rs. 6.50 lakhs which now can be transferred to XYZ bank or financial institution.
Advantages of Home Loan Balance Transfer:
There are several advantages in Home Loan balance transfer most important of which are a reduction in interest rate and enhancement in payment tenure.
Increasing Home Loan Tenor with Balance Transfer Facility:
Consider the Home Loan has been taken early in your career when you had less income and repayment capacity.
So you had opted for a certain Home Loan tenure depending upon your earning and repaying capacity.
But now, your income has gone up, and you do not wish to liquidate your Home Loan balance amount.
So you can always look for banks or financial institutions which are providing such facilities.
This will be possible by way of Home Loan balance transfer. This way you can extend the tenure of your Home Loan balance.
Interest Rate Reduction:
One of the most popular factors for Home Loan balance transfer is nothing but lower Home Loan interest rate offered by other banks.
Even a smaller reduction in interest rate of 0.30 % to 0.50 percent will result in huge savings over the years.
Thus you should always be on the watch for better options provided for the balance transfer.
Caution:
One thing that most of us overlook while opting for a balance transfer is the cost incurred in the form of charges that the new bank will take.
Consider the previous example wherein we are opting to transfer the balance loan amount of Rs.6.50 lakhs with a residual tenure of 5 years.
But there are various charges that the new bank will demand. These charges will be in the form of bank processing fees, stamp duty on loan agreement for the remaining balance, legal charges, valuation charges etc.
So be extra cautious while transferring your House Loan balance.
Always weigh in and calculate both the extra cost and expenditure against the benefit of balance transfer.
And if you feel that you are having the better share of it, and then definitely opt for the balance transfer.
The Bottom Line
Banking is very competitive these days and the credit analysis has also improved which can now provide you with such delightful and helpful options which were not available in earlier days. You have to only be vigilant, aware and ready to grab the opportunity.
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Category: Financial Planning
