When individuals opt for a home loan, it is usually for a tenure of 15-20 years depending on the age and amount of the home loan.
There are chances that in a due course of time, there can be variation in the bank interest rate or service from the bank, especially in the case of floating home loans. Individuals have all the right to opt for the home loan transfer.
Reasons when to opt for home loan transfer
Only higher interest rates should not be the reason for the a switch in your home loan. Various other factors that should be considered include:
1. Interest rates
In spite of falling interest rates, if your bank is reluctant to reduce the interest rate charged even when the competitors banks are offering a lower rate, it maybe time to switch, especially in big ticket home loans. Also, switch when there is considerable amount of loan to be paid.
2. Lethargic approach on the part of bank
If you feel the service is shoddy, it maybe time to change. For example, when you approach your bank for any allied loan service, such as home loan statement or when they tend to fail to inform about the current offers. When your bank is not responding and treating you as a previliged customer.
3. No top-up of loans
If your bank is not allowing for top-up loans which you are entitled to, while other banks are happily offering the same.
When is the best time for home loan transferring?
The time to transfer home loan balance is when you are in the initial period of your home loan. At this period, even a 50 basis point reduction will be very beneficial.
When is balance transfer not advised?
In case where the remaining tenure is less than 5 years it is not advisable to opt for Home Loan Transfer. This is because, there will be no financial benefits as cost attached to Home Loan Transfer will make it even and there will be no point in transferring the home loan at this stage. Apart from this you would have to do needless running around.
Is transferring home loan balance worth?
Transferring home loan from one bank to another can be a cumbersome process as this involves a lot of procedures, you need to get NOC and other documents. Your earlier bank should release documents to your new bank.
Most of the time the bank you are applying will again do a fresh background check on your credit score and repaying capacity.
Some banks do charge around 0.5 percent of the loan or a flat Rs. 5000-10000 as processing fees.
Experts believe that a balance transfer to be beneficial there should be a reduction in interest rates of 100 basis points if tenure remaining is less than five years. For tenure of 10 years it should be a reduction of 75 basis points and 25-50 basis points if 15 - 20 years left.
It's only then you stand to benefit.