If you have applied for a home loan a few years back, it is quite normal to come across current home loan plans offering better terms. Lenders are always updating their home loan plans in order to entice more customers, but this does not mean that you have to miss out on a good deal. You can always apply for a home loan balance transfer. This involves transferring your outstanding home loan debt from one lender to another for better terms.
But is transferring a home loan to a new lender always a good option? If not, when is it the right time for one to go ahead with the transfer?
So, when should a borrower ideally transfer their home loan to a new lender?
- Borrower’s credit score has improved
Lenders always prefer their borrowers to have decent credit scores. This is because it decreases the lender’s risk. Therefore, most financial institutions offer better deals to borrowers who have maintained good credit scores. Ideally, it is advisable to maintain a credit score of 750 or more. With this, you can also get a good deal on a home loan balance transfer, such as a lower interest rate, top-up loan, and/or better repayment tenure.
- The revised interest rate helps in easing the EMI payments
The interest rate is one of the biggest reasons that borrowers shift from one lender to another. Even a slight drop in the home loan interest rate can have a significant impact on the overall cost of the loan. It can also help in reducing the loan’s monthly instalments. So, make sure to focus on the home loan balance transfer interest rate that the new lender is offering.
- The cost of transferring the loan is worth the effort
It is very important to be aware of all the additional charges involved in transferring your home loan to a new lender. This is to ensure that the amount you save from the transfer is more than that of the cost of getting the transfer done. So, make sure to check whether the lender is including processing fees, administration fees, application fees, etc. for the transfer to get done.
- A majority of the current loan’s repayment tenure is remaining
The only way you can effectively save money by transferring your loan is to ensure that a majority of the current repayment tenure is left unpaid. If the tenure is almost over and only a few instalments are left to be paid off, you might not be able to save much with the new terms. So, before going ahead with the transfer, check the tenure left on the loan.
So, after going through all these pointers, make sure to keep them in mind before transferring your home loan. In addition, it is advisable to check with the new lender about the documents required for home loan balance transfer. This will help avoid any complications while transferring the loan.
