13 APRIL, 2022

A home loan balance transfer is a convenient way to reduce interest rates. There are several benefits of opting for a balance transfer. Getting a reduced interest rate on home loans is one of the most common benefits to help ease the monthly EMI burden. But what if you want to transfer your home loan multiple times? Is it possible? If it is at all possible, let’s find out how. 

 

What exactly is a home loan transfer?

The home loan balance transfer facility allows home loan borrowers to switch their loan to another lender before their loan tenure ends. 

 

When you opt for a balance transfer, the new lender considers the application as a fresh home loan application. Once approved, the new lender repays your outstanding loan amount to the existing lender. Now, your loan is closed with the existing lender, and you are asked to repay the remaining EMIs to the new lender at their interest rates.

 

Benefits

As mentioned earlier, the most significant benefit of switching your loan is getting a lower interest rate.

For example, suppose you have availed a home loan of Rs. 25 lakh at a 7% interest rate for 20 years. The approximate total interest due for payment will be Rs. 21.5 lakh. However, if a different lender offers a reduced interest rate of say 6%, your total interest amount would be almost Rs. 18 lakh, saving an amount of Rs. 3.5 lakh.

 

However, you can also enjoy the following benefits by refinancing your loan -

  • You can restructure your loan to get a different tenure and a better EMI amount
  • You can get additional facilities like top-up loans, doorstep facilities, etc.
  • You can switch to get better services

 

How many times can you transfer the loan?

There are no restrictions on the number of times you can transfer the loan. Nor can lenders object if you want to transfer your home loan more than once. However, it might not be a wise decision to transfer your home loan more than once due to the following factors -

 

  • Applying for a home loan balance transfer is treated as a new loan application. It means that it involves the entire process of paperwork, formalities and documentation
  • Switching your loan is time-consuming and tedious
  • You will need to ensure that you meet the eligibility of the lender every time you plan to switch
  • You need to pay the processing fee and transfer cost to switch your loan. You might also need to pay prepayment charges if you have a fixed interest rate loan
  • It might not be a good idea to switch in the later years of the loan, as you would have paid a considerable part of interest already
  • Considering the transfer cost, you might not save anything by multiple transfers

Considering the amount of money you can save with one switch, a home loan balance transfer seems an appealing option. However, it is prudent to do a cost-benefit analysis and ensure that you have a significant amount to save by the transfer. Transferring multiple times should not cost you more than you plan to save.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.