Balance transfer home loan can be a smart move and beneficial to you if you have a home loan and want to save money on interest or improve the loan terms. The outstanding balance of your current home loan gets transferred to a new bank that provides better interest rates and clears the old loan when you opt for a balance transfer home loan. Read on to explore how much loan you can get and what to consider when switching to another bank.
What Are Balance Transfer Home Loans?
When you take a home loan from a bank, you must return it with interest over a specific period. However, if you find another bank offering a better deal with lower interest rates or other benefits, you can move your home loan from your current bank to the new one. This transaction of switching to another bank is called a Balance transfer. The new bank will pay off the remaining amount you owe to your old bank, and then you start repaying the new bank according to their terms and conditions. It can help you save money in the long run if the new bank offers better terms.
Advantages of Balance Transfer Home Loans
Given below are a few benefits you should know before switching your loan to another lender als.
Many people think transferring a home loan from one bank to another is not easy, but it is a simple process. You just have to apply for a transfer by submitting a letter to your current bank, giving you a No Objection Certificate (NOC). After that, you can approach the new bank for a balance transfer.
The new bank will have to approve your application once you have fulfilled all the obligations of the new bank. You have to provide the NOC received from the old bank in order to complete the process easily. It is a crucial document that the new bank will require.
Lower Interest Rates
Switching to a bank that will offer you lower interest rates along with special rewards. If another bank or company offers a lower interest rate than your current one, it’s worth considering. Even a small difference of 0.5% per year in the interest rate can substantially impact the total amount you pay. Also, it helps to reduce the monthly burden of your loan instalments, making it more manageable for you.
Let us assume you are facing some difficulties in repaying your current home loan instalment due to it being expensive. The best way to get a solution for this problem is by switching to another bank that offers a repayment plan that is now suitable for you. With balance transfer home loans, you also get the option to extend your repayment period. This means you’ll have smaller monthly payments that you can comfortably manage for a longer period.
It Helps You Upgrade Your Loan Amounts
How much home loan I can get? There is another advantage of a home loan balance transfer. This advantage is an extra amount of loan money you can get from the bank on top of your existing loan amount. The maximum amount you can borrow is 25% of the loan amount, known as a Top-up loan.
The best thing is that the interest rate on this top-up loan is cheaper, and you are not restricted to using such loans only for purchasing a home; you can use it for your child’s education, renovate your home, or make critical home repairs. Simply put, it’s like obtaining more money at a better interest rate for anything you need.
Finally, shifting your home loan is a beneficial option, and it is often determined by your circumstances and economic conditions. A home loan balance transfer calculator will assist you in comparing interest rates and making informed selections.
In conclusion, a balance transfer home loan is a smart choice to optimise your borrowing limit and get better interest rates. But it becomes vital to consider all the advantages and disadvantages of switching to another bank, like prepayment penalties, fees, charges, etc. Sometimes switching after paying off the majority loan is not advisable as it might not be beneficial overall. Thus, you can make a calculated decision and meet your financial goals by being well-informed.