One of the most significant financial responsibilities is a home loan. It is essential to understand that if you avail it, you are not bound to just one financial institution for the total tenure. This is what a home loan transfer is.
It is well-known that the borrower is inclined towards more beneficial terms. Therefore, to be happy with the terms and conditions of the loan is quite important, as the top reason why people switch home loans is the rate of interest.
What is a home loan?
It is a type of loan that is taken out to purchase or construct a residential property in India. This long-term loan is provided by banks, financial institutions etc. Nowadays, since digitalisation has taken over, availing such kind of loan has been super easy with just a simple download of a home credit loan app.
These are typically secured loans, which means that the borrower has to provide collateral in the form of the property being purchased. The amount of the loan here depends totally on the income of the borrower, creditworthiness, and the property’s value that is being purchased.
What is a home loan transfer?
As the name suggests, it is basically a process where a borrower transfers their existing home loan from one lender to another. This is usually done when the borrower seeks a lower rate of interest or better repayment terms.
In our country, it has become quite popular in recent years due to the increasing competition among banks/financial institutions in order to offer attractive rates of interest and loan terms. By transferring their loan to another lender, the borrowers reduce their EMIs (Equated Monthly Instalments), save on interest rates, and pay off the loan much faster.
How to calculate savings and potential benefits of Home Loan Transfer?
Determine the Current Outstanding Amount
As a borrower, this is basically the amount you still owe on your current home loan.
Check the current rate of interest
It is essential to first check the current interest rate on the home loan from your lender.
Find out remaining tenure
Keep in mind to determine the remaining tenure of the loan. This ultimately helps in calculating the total interest payable over the remaining loan tenure.
Check processing fees and other charges
Check the processing fees as well as other charges applicable for the balance transfer of your home loan.
Research terms and conditions of other lenders
This is an important step to find out if you can get a lower rate of interest or better loan terms by transferring the home loan to another lender.
Use EMI calculator
Such tools are readily available on a home credit instant loan app. It helps you determine the new EMI and the total interest payable on the new loan.
Subtract the total interest payable on the new loan from the one on the current loan to determine the savings. Further, add the processing fees and other charges to calculate the net savings.