A home loan balance transfer is where a borrower transfers an existing home loan to a different lender. It is vital for borrowers to opt for this facility only after carefully considering the long term benefits and not end up paying more than they would have paid with their existing home loan.

Any home loan borrower should therefore know when to opt for a home loan balance transfer for maximum financial benefits.

When to opt for a balance transfer?

Since repo rate and MCLR rates are revised by the Reserve Bank of India, borrowers may come across a lender offering more affordable interest rates on home loans than they are currently paying on their existing loan. Opting for a home loan balance transfer may seem to be a wise decision in this case as it will reduce the total cost of the loan. However, this shouldn’t be the sole consideration for a balance transfer.

Individuals who know everything about home loan balance transfer will also understand that it is neither advisable nor profitable to switch lenders when most of the loan tenor is over. A borrower generally pays the lion’s share of their liable interest in the first half of their repayment tenor.

A balance transfer at this juncture will only increase the total cost of loan as there are certain fees and charges applicable on home loan balance transfer, primarily including foreclosure fees to be paid to the existing lender and the balance transfer charges as applicable with the new lender.

Borrowers should consider all the above factors and then make informed decisions regarding home loan balance transfer at the right time.