A home loan is a long-term financial obligation that requires you to be consistent with your repayment. Your EMIs are based on the interest rate and type of home loan you’ve opted for apart from the total loan amount. You should know that while home loan interest rates change every now and then, it is your responsibility to figure out whether you’re getting the best value for your money. If you aren’t, it might be time to refinance your loan. You can do this by opting for the home loan balance transfer feature with another lender that offers a better, more suitable interest rate.
To better understand why a home loan transfer is the best at reducing home loan payments, look at its advantages below.
You can Reduce your EMIs
While you may have used a home loan EMI calculator before availing your home loan, the continuous EMI payments may start weighing down on your pocket as you age. This is especially hassling when you are aware of other lenders offering better interest rates. A balance transfer to one such lender helps you enjoy a lower interest rate that is charged on your principal amount which automatically results in lower EMIs. Not only is this easier on your pocket, it also helps you save on interest expenses significantly.
You can Reduce your Tenor
When the interest rate on your principal amount drops giving you lower or cheaper EMIs, you may be able to choose a shorter tenor. In this case, you can choose to pay EMIs of the same amount as you were paying earlier, but with a shorter tenor, or you can choose to increase your EMIs by an amount that you can afford. With a shorter tenor, you are free from debt faster and your total interest reduces.
Things to Keep in Mind when You opt for a Home Loan Balance Transfer
Tenor of your Current Home Loan
Before you think of refinancing your housing loan, consider the current stage of your repayment. Generally, it is advisable to opt for a balance transfer during the first half of your repayment simply because the interest component on your EMIs is larger than the principal component during this time. This means that transferring early, and at a better interest rate, could help you reduce your total interest.
For instance, say you have a house loan of Rs.60 lakh for 240 months at an interest rate of 11% taken in the year 2001. Say you have already paid off EMIs for the first 100 months and plan to refinance the loan in 2019, when you have 140 months left on your tenor at the new rate of 8.85%. Your total savings in this case will be Rs.10.34 lakh.
Top-up Loan Feature
When you refinance your home loan, lenders typically offer you a top up loan. This loan is in addition to your housing loan and the amount you’re offered depends on your housing loan repayment history. Some lenders have the amount capped, for instance, Bajaj Finserv offers a top-up loan up to Rs.50 lakh. This loan has no spending constraints and can be used to meet any financial goal.
The Cost Analysis of Availing the Home Loan Balance Transfer
In an attempt to save money, always consider the cost of refinancing your home loan. While it may offer great benefits, you’re required to pay fees to both, your current lender and new lender in the process. Factor all of these costs in and gauge whether or not this switch is actually going to save you money.
Always bag opportunities that ease your financial obligation, but do so only after thorough research. When you opt for the Bajaj Finserv Home Loan Balance Transfer, not only do you stand a chance to get a more affordable deal, but you also enjoy the luxury of transparency. This means that there are no hidden charges that can stress your finances. Additionally, if you opt for a floating interest rate housing loan when carrying out a balance transfer, you enjoy zero part-prepayment and foreclosure charges. To avail of this feature and all its benefits, check your pre-approved offer to get access to an easy home loan refinancing option.