How A Home Loan Balance Transfer Can Work In Your Favour
A home loan balance transfer is a beneficial feature offered by financial institutions wherein the borrower can transfer their remaining principal amount to another lender for favourable terms. Although there are various terms that they can negotiate when transferring the credit, the most crucial one is the interest rate.
Read on to know about how a home loan balance transfer can be beneficial for you.
An overview of balance transfer
Since a home loan is a long-term credit facility and the repayment tenor is stretched for a longer period, interest outgo will be higher over the loan tenor. When borrowers transfer their outstanding principal amounts for a lower home loan interest rate, they can significantly save over the years.
But it is essential to conduct a cost-benefit assessment before switching lenders to understand how much they can save or whether a home loan balance transfer is worth it.
When is it ideal to choose a balance transfer?
Before considering a home loan balance transfer, you must check how much tenor is left. If your loan tenor is almost ending, transferring lender may not be beneficial. This is because during the end of tenor, EMIs mostly involve the principal amount and the interest component is nominal. In other words, the interest due is already paid off, and only principal amount is left at this point.
In this same logic, a balance transfer can be beneficial during initial years of a tenor. This is because, during these years, the EMIs mostly involve both principal and interest components for nominal shares.
In this regard, borrowers can take help from home loan balance transfer calculator to know the savings they can do by transferring the remaining loan balance.
Moreover, borrowers can significantly save on both principal and interest components up to a certain amount through tax benefits on home loans.
Thus, to conclude, once borrowers understand how home loan balance transfer works, they can make an informed decision by assessing all the factors.
