In today’s time, despite your housing loan eligibility being approved, you need funds in order to purchase the dream property. This is because the real estate prices in our country have witnessed a huge hike in recent years. Such factors have made it almost impossible for individuals to attain the key to their dream home.
This is where a home loan steps in. Moreover, it’s human nature that people are more inclined towards things that benefit them the most. So, due to these factors, they prefer to transfer their home loan!
What is a home loan?
As the name implies, a home loan is a type of loan that individuals can use to purchase a home or other types of real estate. It is typically offered by banks/financial institutions and is secured by the property being purchased. In simple terms, it means that if by any chance the borrower is unable to repay the loan, the lender has the complete right to seize and sell the property to recover the amount.
Usually offered with a fixed or adjustable rate of interest, it gives the borrowers the flexibility to make regular payments over a period of several years until the loan is fully repaid. Further, the loan amount, interest rate and repayment period depend on various factors. This includes credit score, income and the property’s value that the borrower is going to purchase.
What is a home loan transfer?
Also known as balance transfer, it is simply a process where a borrower transfers their existing home loan from one lender to another. It is basically done to avail better terms and conditions such as lower rate of interest, reduced fees as well as longer repayment period.
This whole process is usually initiated to reduce the burden of the borrower and save money in the long run. Here, the borrower has to pay off the outstanding amount of the existing ongoing loan to the original lender and take the new loan from the new lender.
What are its pros and cons?
Pros
● Low Rate of Interest
The primary pro of transferring a home loan is the ability to lower interest rates. So, if you currently have a high-interest rate loan, transfer it to a lender with a lower rate to save a significant amount of money.
● Improved loan terms
It helps you negotiate better loan terms. These include longer repayment tenure, reduced processing fees and lower prepayment penalties.
● Enhanced Savings
This scheme also helps in reducing monthly payments. So, ultimately, you can save money and use it to achieve your other financial goals.
(Tip: Check your housing loan eligibility before opting for a loan.)
Cons
● Longer Tenure
When you transfer your home loan to a new lender, it might lead to an extended tenure. So, the longer the tenure, the more interest.
● Impact on Credit Score
The credit score in this overall process is impacted negatively. The process involves shutting down an existing loan account and opening a new one, which can temporarily lower your credit score.
● Extra costs
When you opt for a home loan transfer, keep in mind that it comes with extra costs. This cost includes legal, documentation and processing fees.
