New Delhi: Feeling a pinch for paying a higher interest rate for a home loan and wanting to switch lenders. You should know that there is an option available called home loan balance transfer. Borrowers can choose to switch lenders in a very easy and convenient way. A balance loan transfer means that you transfer the existing loan or the remaining amount from one bank to another.
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What are the new RBI guidelines?
RBI has removed foreclosure penalties. Under new RBI guidelines, borrowers can qualify for home loan balance transfer if they secure lower interest rates from other lenders. If done wisely, it reduces EMIs and makes the home loan much more affordable.
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From now on, credit institutions cannot impose penalties for seizure or early repayment of mortgages. Previously, borrowers avoided prepaying a loan due to higher prepayment charges.
Benefits of Home Loan Balance Transfer
Low interest rates
It’s simple and obvious. The low interest rate is the main thing that attracts customers to tip their lenders for the home loan balance. If an existing loan carries a higher interest rate, a loan balance transfer is a good option.
Loan interest rates are determined by the eligibility and credit history of the applicant. Banks and lenders offer attractive interest rates if the credit rating is strong. This helps reduce the EMI of the remaining loan.
Duration of the mortgage
A home loan transfer also offers the option of revising the term as the interest rate is lowered on the remaining principal amount. A loan balance transfer helps transition to better loan terms. Transferring or refinancing the home loan balance could help reevaluate the tenure.
The add-on loan provides an option to finance a new home or renovate the existing property or something else. In case of more funds, this option is very advantageous. Most lenders offer an additional loan facility at attractive interest rates on top of your existing loan.