Know About the Ideal Moment to Switch Your Housing Loan to Another Lender in IndiaPurchase & Refinance Mortgage LoansUpdated on Dec 26, 2019 View more like this | Visit India, UN | Contact Anamika Verma |
From different types of RBI guidelines to fluctuations in rates, several factors influence the rate of interest offered by financial institutions. Additionally, a shift from MCLR to repo rate has also had an impact on the interest rate for loans.
In case a borrower is repaying EMIs with high rates of interest, availing a home loan transfer is a viable option to reduce the total amount paid in interest.
To determine the time to switch, it is essential for borrowers to understand all crucial factors related to transferring of their loan –
EMI Payments
The EMI calculated on a loan amount consists of two components –
1) Interest.
2) Principal.
During the initial months of repayment, the interest is much higher while the principal amount is less. As more of the interest on the home loan is repaid over the months, the principal amount in a single EMI goes up.
As a result, it is important for borrowers to check their EMI statements regularly. Availing a home loan transfer during the initial tenor is more beneficial.
Under such circumstances, another financially advantageous option is that of prepayment. If a borrower has sudden access to adequate finances, clearing a substantial portion of the loan can lead to an immense reduction in the total expense on EMI repayment.
Rate of Interest
Looking for convenient rates of interest is crucial while availing a home loan transfer. Interestingly, this does not just include checking the available rates of interest.
It includes –
1) Choosing the type of interest rate
2) Checking the total repayment expense on different rates.
3) Checking the type of rate followed by a lender.
While most financial institutions offered MCLR based interest rates, RBI guidelines have instructed them to shift to the repo rate.
One of the major objectives of the shift from MCLR was to implement rate cuts for customers of financial institutions.
Consequently, it is also important for borrowers to understand how to choose between floating and fixed interest rates. In the case of the former, RBI rate changes directly influence the interest amount. The latter, on the other hand, is safe from such rate changes. Borrowers should be on the lookout for low repo rates to transfer their loans.
Also Read:4 Solid Ways to Reduce Your Home Loan Burden
What is a balance transfer?
Balance transfer offered by financial institutions can be advantageous since it offers borrowers the option to avail convenient rates of interest.
A few additional features are also offered on them –
1) A major advantage of availing a balance transfer is that borrowers can avail additional credit on their existing loan. Known as a top-up loan, this allows customers to finance their requirements without the hassle of applying for a new line of credit.
2) Usually, balance transfer allows borrowers to restructure their repayment tenor. In case there is a change in the FOIR (Fixed Obligations to Income Ratio) of a borrower, rearranging the tenor can be immensely helpful. This can allow a borrower to increase the EMI amount and thereby pay lesser interest with decreased tenor.
Typically, application for a balance transfer of home loan should begin with an online calculator and calculation of the exact repayment amount. When a borrower applies for a transfer, the financial institutions verify all relevant documents before approval. Usually, the application is quick like those for loans.
It is important for borrowers considering to avail home loan transfer to check all requirements from before. While this saves time, on the one hand, it also reduces hassle. Checking the documents required for a home loan balance transfer as well as eligibility criteria are crucial before applying.
In case a borrower is repaying EMIs with high rates of interest, availing a home loan transfer is a viable option to reduce the total amount paid in interest.
To determine the time to switch, it is essential for borrowers to understand all crucial factors related to transferring of their loan –
EMI Payments
The EMI calculated on a loan amount consists of two components –
1) Interest.
2) Principal.
During the initial months of repayment, the interest is much higher while the principal amount is less. As more of the interest on the home loan is repaid over the months, the principal amount in a single EMI goes up.
As a result, it is important for borrowers to check their EMI statements regularly. Availing a home loan transfer during the initial tenor is more beneficial.
Under such circumstances, another financially advantageous option is that of prepayment. If a borrower has sudden access to adequate finances, clearing a substantial portion of the loan can lead to an immense reduction in the total expense on EMI repayment.
Rate of Interest
Looking for convenient rates of interest is crucial while availing a home loan transfer. Interestingly, this does not just include checking the available rates of interest.
It includes –
1) Choosing the type of interest rate
2) Checking the total repayment expense on different rates.
3) Checking the type of rate followed by a lender.
While most financial institutions offered MCLR based interest rates, RBI guidelines have instructed them to shift to the repo rate.
One of the major objectives of the shift from MCLR was to implement rate cuts for customers of financial institutions.
Consequently, it is also important for borrowers to understand how to choose between floating and fixed interest rates. In the case of the former, RBI rate changes directly influence the interest amount. The latter, on the other hand, is safe from such rate changes. Borrowers should be on the lookout for low repo rates to transfer their loans.
Also Read:4 Solid Ways to Reduce Your Home Loan Burden
What is a balance transfer?
Balance transfer offered by financial institutions can be advantageous since it offers borrowers the option to avail convenient rates of interest.
A few additional features are also offered on them –
1) A major advantage of availing a balance transfer is that borrowers can avail additional credit on their existing loan. Known as a top-up loan, this allows customers to finance their requirements without the hassle of applying for a new line of credit.
2) Usually, balance transfer allows borrowers to restructure their repayment tenor. In case there is a change in the FOIR (Fixed Obligations to Income Ratio) of a borrower, rearranging the tenor can be immensely helpful. This can allow a borrower to increase the EMI amount and thereby pay lesser interest with decreased tenor.
Typically, application for a balance transfer of home loan should begin with an online calculator and calculation of the exact repayment amount. When a borrower applies for a transfer, the financial institutions verify all relevant documents before approval. Usually, the application is quick like those for loans.
It is important for borrowers considering to avail home loan transfer to check all requirements from before. While this saves time, on the one hand, it also reduces hassle. Checking the documents required for a home loan balance transfer as well as eligibility criteria are crucial before applying.
