If you are planning to buy a house or a commercial property and are in need of financial support, taking up a home loan will help you for the better. A home loan is a secured loan, which means it is risk-free for the lender as well as the borrower. You can apply for a home loan at a banking institution or a non-banking financial company offering a lucrative interest rate. After considering relevant credentials and eligibility facts, the lender will decide whether you are financially fit for a home loan or not. Using the eligibility criteria, they can even calculate the loan amount you can get to purchase a particular property.
There are a wide variety of home loan types that are suitable to serve individual purposes. Here is a compact list of the same –
- Home Purchase Loan is for purchasing a house.
- Home Improvement Loan serves home renovation criteria.
- A Home Construction loan is when you are building a house.
- Land Purchase Loan serves the purchasing criteria where you can construct a house in the near future.
- Home Extension Loan is for adding a new room, or a floor to an existing home.
Benefits of home loan
- A home loan is one of the cheapest borrowing tools with really low interest rates.
- The prepayment penalty for a home loan is zero, which means it provides a great opportunity to the borrower to be debt-free quickly.
- It is one of the biggest tax-saving tools as well.
- Through a home loan, you can get instant access to liquid cash, so it becomes quite easier to meet financial goals.
- Before approving the loan, the lender conducts strict diligence, which reduces the risk level as well.
What is a home loan balance transfer? When it is convenient to opt for a balance transfer?
A home loan balance transfer is also known as refinancing. Normally all the lenders propose this facility. If the borrower passes the eligibility test and other required criteria a balance transfer can take place. Sometimes even the existing lenders negotiate their loan terms with the borrower in terms of interest rates and repayment as part of the balance transfer facility.
The main objective served by the balance transfer functionality for a home loan is that it helps the borrowers to avail the loan at a lower interest rate, revised repayment procedure and convenient tenure.
Now let us see when is the right time to do a balance transfer-
Early years of the existing loan
The early years of the home loan is an ideal time for a balance transfer. It is not profitable during the end since you would have to pay a cost transferring amount as an add on to the actual loan amount.
The overall cost is reduced
Sometimes due to RBI regulation policies, the interest amount on a particular loan gets reduced. When that happens, the lenders offer a lower interest rate and monthly EMIs. It is a perfect time if you are thinking about balance transfers.
The unpaid home loan amount is bigger
In case you are midway through the loan and are still liable to pay a considerable amount of money out of the total amount, it makes sense to transfer the loan balance to a new lender for a reduced interest rate.
Balance transfer cost is low
Banks generally charge a loan balance transfer amount from the respective lender. It is wise to compare the balance transfer cost of all the available lenders before finalising one.
Property authorisation
Before transferring the loan balance, it is important to get absolutely sure whether the new lender has approved your loan request after evaluating the required documents or not. Lenders do vary when it comes to deciding the home loan eligibility criteria of an individual borrower.
Benefits of balance transfer
- Low interest rate along with low tenure.
- Balance transfer enables a borrower to cover additional financial objectives like debt consolidation, wedding, study abroad and so on.
- It also helps you to avail the benefits of the part-prepayment procedure. So, you can lower your outstanding loan amount in an instant.
A balance transfer facility has its own set of pros and cons. It is always recommended to renegotiate the existing loan’s terms and conditions with the respective lenders both old and new to avoid unnecessary misunderstandings.