When Should You Choose Home Loan Balance Transfer?
By Anupama Deshpande | April 30, 2018

Home Loan Balance Transfer is a switch of the outstanding home loan account from existing lender to another new lender where better facilities are being offered by the new lender. In simple terms, it can be understood as "Availing a new home loan from another lender to repay an existing home loan". It saves cost of the borrowers.

Home loan balance transfer involves the fore-closure of the current home loan with the existing lender and shifting the remaining loan account to another lender. The decision of home loan balance transfer should be taken carefully after considering all the required things and not in a hurry.

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During a declining interest rate regime, interest rates on advances also fall. In such cases, if you have availed home loan from one bank on a higher rate, then it is a better option to go for home loan refinance from another lender who is offering home loan at lower interest rate. In this way, you can enjoy saving on your interest cost.

You are not happy with your existing lender due to poor servicing is being offered by it. You are not being serviced properly and timely by it, for example non issuance of loan statement in time, no information about changes in interest rate, etc. This may cause financial loss in some cases due to delay or any other cause. In this scenario, it is better to shift to another lender.

Balance transfer is a better option when you are there at the early stage of your home loan tenure which means that you have not paid much on interest portion. With the help of balance transfer to a lender offering lower interest rate, you can enjoy either lower EMI or decreased tenure.

If you require higher top up loan & the new lender is providing more top up loan with balance transfer facility, then you must shift to the new lender. As the top up loan is also offered at lower interest rate, it would be beneficial for you to go for balance transfer and avail more top up loan instead of going for other loan options like personal loan, etc. which are offered at much higher interest rates.

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Suppose there is a fall in your income and you want to pay lower EMI, then home loan balance transfer is helpful, if longer repayment tenure is being offered by another bank. In this way, you can decrease your EMI.

In order to attract the customers, some banks offer balance transfer facility with lower interest rate as well as they waive off other administration charges such as processing fee, valuation report fee, etc. In that case, it is a win-win situation for you, and you must avail the facility of home loan balance transfer.

1. Home loan balance transfer option is beneficial, only if there is a considerable difference in interest rates offered by new lender and existing lender
2. During early stage of home loan tenure
3. Consider other charges like processing fees, foreclosure charges, administration changes, legal fee, valuation fee, stamp duty, etc. very carefully
4. You must have good track record of loan repayment with existing lender
5. You must calculate the actual saving that you are getting, if you opt for home loan balance transfer
6. You should not consider balance transfer option, if you are going to pay off your home loan sooner
7. You need to obtain a No Objection Certificate (NOC) from your existing lender for home loan balance transfer
8. Sometimes, negotiation with your existing lender on lowering current interest rate, may work as a better option, if it considers an interest rate reset request given by you

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