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This article is more than 2 month old.

Home loan balance transfer: Key points to consider before switching to new lender

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With the onset of the festive season, several banks have announced a slew of offers on home loans As a result, the rates have fallen to historic low levels, providing much-needed comfort to borrowers.

Home loan balance transfer: Key points to consider before switching to new lender
It is raining offers on home loans as major banks announce cheaper interest rates ahead of the festive season to woo property buyers or those planning to switch their mortgages to a different bank. Banks are fiercely competing in the home loan space to bring in new customers as the interest rates drop to historic lows.
The obvious question most borrowers face in such a situation is: Should I switch to a lower interest rate home loan or simply balance transfer home loan?
Experts suggest borrowers must consider home loan balance transfers with factoring in additional costs, often hidden as well.
Speaking to CNBC-TV18, Adhil Shetty, CEO at BankBazaar.com said that for an existing homebuyer whose income channels haven’t been hit, this might be a good time to evaluate a home loan.
“Interest rates are currently at record lows. There are around 20 lenders who have pegged their lowest home loan interest rate at 6.9 percent or lower,” he said.
However, while considering a loan transfer, it is essential to take into account the expenses associated with it.
Home loan balance transfers usually attract a processing fee of 1 percent, payable to the new bank. This is important to note as this may overshadow the savings the borrower may incur if they transferred the loan, depending on the loan amount, Shetty cautioned.
"But, the processing fee varies from bank to bank and is not fixed at 1 percent. So, one may even be able to waive it off entirely. In addition, there can be legal charges, valuation fees, stamp duty, and other charges associated with the loan. Typically, all the costs associated with a new loan are applicable to the refinance as well," said Shetty.
Hence, it’s better to calculate the exact change in outflows before borrowers refinance their loans. As a thumb rule, the difference should at least be a minimum of 0.5 percent from the existing rate for good savings post-processing fees and other charges.
Also, Shetty said that borrowers should negotiate with their lenders for better rates before opting for refinancing as this could prove less expensive and more convenient.
The country’s largest lender State Bank of India (SBI) has launched a bouquet of offers for prospective home loan customers. On the other hand, Kotak Mahindra Bank has cut the home loan interest rate by 0.15 percent to 6.50 percent.
PNB has slashed the interest rate on home loans above Rs 50 lakh by 0.50 percent to 6.60 percent. Bank of Baroda is offering a waiver of 0.25 percent on the existing applicable rates for home loans.
Disclaimer:
The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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