Handy Guide to Easily Switch Your Home Loan
According to ICRA, the housing finance credit market has seen a total growth of 19% in FY19-20. This is a stable increase from 16% since the last financial year. As housing finances companies (HFCs) are offering attractive offers at borrower-friendly terms, more individuals are inclined towards availing home loans.
Homeowners can even switch from one HFC to another that is offering a lower rate of interest with the help of the home loan balance transfer facility.
Here is a guide stating how and when individuals considering a transfer should proceed with the process.
When to refinance home loans
- Lower interest rates
Top financial institutions are known to offer home loans at a floating rate. Consequently, the interest provided varies amongst these housing finance companies.
Borrowers willing to save on EMI payments are inclined to avail a new loan with lesser interest costs. It is one of the most common reasons why individuals consider a home loan transfer.
- Top-up loan
A key benefit of a balance transfer is the ability to avail a top-up loan. The facility allows you to apply for an incremental amount in addition to the outstanding home loan amount. You can use these funds to fulfil your urgent financial needs on your list.
They usually have a longer tenor of up to 20 years, similar to that of a home loan. Borrowers can even avail tax exemptions if the loan is used for house construction/repairs. Individuals are eligible for these loans should –
- Have a pre-existing loan with a financial institution.
- Should not be a defaulter with a low credit score.
- Change in financial status can lead to a home loan balance transfer
A decline in economic stability can affect a borrower’s capacity to make timely EMI payments. One option is to opt for a longer tenor with the downside of paying a huge amount as interest charges.
In such cases, borrowers can apply for a balance transfer. They can choose an HFC charging a lower rate of interest, making it easier for them to continue the payments.
Contrarily, customers with improved financial status should apply for a balance transfer as well. Individuals looking to opt for part-prepayments should keep in mind the fees and other charges associated with the facility. Nonetheless, a balance transfer enables them to choose a higher EMI and a shorter tenor, allowing them to save a significant amount on:
- Interest costs.
- Prepayment fees and foreclosure charges.
How to refinance home loans
- Applying to a new lender
Home loan balance transfers help you save money only when you choose the appropriate HFC. Here are a few points to consider when switching to another HFC:
- Calculate the benefits after considering the total cost, including transfer charges and other related fees.
- Look for top-up loans.
- Documents required when approaching another lender
Homeowners can apply for a home loan once a minimum number of EMIs have already been paid, and the property is ready to be occupied. Required documents include:
- A no-objection certificate and a foreclosure letter from the current financial institution.
- All home loan-related documents within the jurisdiction of the HFC.
- Home loan repayment record.
- Necessary identification document required by the lender.
With the rise in home loan applications, various financial organisations are now providing such products at borrower-friendly terms.
Due to the high amounts associated with home loans, availing them can become a significant financial liability. This guide on how and when to avail home loan balance transfer can help you decide which financial institution offers the best financial benefits.
Also Read: Know the Benefits Which We Get From Home Loan Switchover