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This article is more than 6 month old.

Home loan balance transfer: Should you do it?

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The lower interest rate regime seems to stay for the time being and that brings in a lot of respite for the existing home loan customers.

Home loan balance transfer: Should you do it?
Owing to a series of rate cuts by the Reserve Bank of India over the last year, the home loan interest rates have fallen to historic low levels providing much-needed comfort to borrowers in a pandemic year. That said, not all home loan borrowers may have benefitted from the reduced home loan rates for various reasons.
And with banks competing fiercely amongst themselves to corner their share of balance transfers via a cheap mortgage, the temptation to give in can be high.
The obvious question most borrowers face in such a situation is: Is it prudent to switch to a lower interest rate home loan?
And the answer simply is a 'yes' as experts opine that switching to a lower-interest home loan makes a lot of sense as borrowers can save in servicing debt and interest on such loans along with the advantage of reduced tenures.
"Home loan borrowers who are paying a higher interest rate can earn substantial savings on their interest outgo by opting for a lower-priced loan via a balance transfer," said Ambuj Chandna, President–Consumer Assets, Kotak Mahindra Bank.
"This is especially advisable when one has a longer loan tenure left to be repaid,” he told CNBC-TV18.
Lenders across the spectrum have recently slashed home loan interest rates since the last quarter of 2020.
“While property developers witnessed increased housing sales on the back of lower interest rates post the relaxation in the lockdown last year, people are also on the lookout for bigger homes since the home has become the centre of our lives. Several domestic top-notch commercial banks have slashed their home loan interest rates in 2020, with further cuts in 2021, with rates now ranging from less than 6.65 percent to 6.95 percent,” said an industry expert.
Lower interest rates would help existing customers in trimming their EMI outgo. If the loan amount is higher, this means that savings would be even more.
Public sector banks including State Bank of India, Bank of Baroda and Canara Bank offer housing loans in the range of 6.70-6.95 percent per annum. Other private sector players like Kotak Mahindra Bank, HDFC Bank, ICICI Bank, Axis Bank offer in the range of 6.65-6.75 percent.
While Bandhan Bank charges an 8.75 percent per annum interest rate, Yes Bank offers home loans at 8.85 percent per annum. The processing fees for transferring the home loan vary between Rs 10,000 to Rs 15,000.
Given the current economic condition, it is best to opt for floating rates as one can take advantage of the low-interest regime.
Given the liquidity in the system, home loan rates are unlikely to see a sharp rise in the near future. Of course, one cannot rule out the same later on if interest rates start increasing.
Hence, existing home loan customers can take this opportunity to transfer their balance loan.
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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