“Home loan starting from 7.5% per annum”. How eager do you get to switch your home loan to a new lender when a lower rate is advertised? The home loan typically lasts between 5 and 30 years, which means you are more likely to find a better deal with a new lender for your home loan requirements.
But as a homeowner, you may feel like there are many hoops to jump through when switching mortgages: processing the transfer of the mortgage, filling out paperwork, etc. However, transferring a home loan is relatively straightforward. In fact, with the right preparation, it can be a stress-free experience.
If you're considering a balance transfer, there are a few things you should know. A home loan balance transfer is when you transfer the balance from one bank to another, usually to take advantage of a lower interest rate. This can save you money on interest and help you pay off your debt faster. Here are a few tips to help you negotiate a successful balance while switching a home loan.
Compare with other lenders and switch to a lower rate
Be realistic about what you're able to afford and be willing to negotiate. Remember, your goal is to get a better deal on your new home loan. So even if you're approved for a balance transfer doesn't mean you have to take the first offer that comes your way. Shop around and compare offers from different lenders to make sure you're getting the best deal possible.
Once you've found the best balance transfer offer, it's time to negotiate the terms. Most importantly, you'll want to negotiate the interest rate. The lower the interest rate, the more money you'll save on interest, and the faster you'll be able to pay off your debt. You can also negotiate the length of the balance transfer, which can impact the overall cost of the transfer.
For an instance, If you are paying 9% interest on ₹1 Cr loan from Lender A, and you can find a loan from Lender B for 8.5% interest on the same terms (30 years loan tenure), you will save approx ₹13 lacs in interest payments over the life of the loan by switching to Lender B.
Make sure you’re aware of the costs involved
One thing you should be aware of when you’re transferring your home loan is that there may be administrative costs involved. The higher cost though is the processing fee that is being charged by the new lender. Usually, it is between 0.25 and 1% of the outstanding loan amount, or it can be a flat fee. Some banks even charge an administrative fee.
When deciding on a balance transfer, such factors should be considered. You’ll need to factor in these costs when comparing the total amount you’ll pay over the life of the loan.
However, if you’ve been with your current lender for a long time, you may be able to negotiate your transfer of home loan without paying exit fees. Make sure you’re aware of your lender’s exit fees before you transfer your home loan.
Know your credit score
When you’re transferring your home loan, you should check your credit score and what’s in your credit report. This will help you understand what impact the transfer may have on your credit and will help in determining whether or not you'll be approved for a balance transfer.
If your credit score is on the lower end, you may still be able to qualify for a balance transfer, but you may have to pay a higher interest rate. If you've been with your existing lender for a long time, your credit score may be higher and you'll be approved more easily for a transfer. The lender will view you as a lower risk compared to someone who has just applied for a mortgage.
The process of switching home loans can be a daunting task, but there are ways to successfully negotiate a balance transfer. To begin, you should compare the terms of your current loan with those of the new loan. It is also important to calculate the costs of switching loans, including any early repayment fees and exit fees. Once you have a clear understanding of the costs involved, you can begin to negotiate with your current lender.
Be sure to have a clear idea of what you want to achieve with the balance transfer before beginning negotiations. If you can successfully negotiate a balance transfer, you can save money on your monthly mortgage payments and pay off your home loan sooner.
Atul Monga is the co-founder and CEO of BASIC Home Loan.