13 APRIL, 2022

A home loan is one of the best ways to buy the house of your dreams. This is mainly due to the flexibility and advantages it offers. You can repay the loan as per your financial comfort and even prepay the loan. However, one benefit that often helps borrowers deal with high-interest rates is a home loan balance transfer. With a home loan balance transfer, you can reduce your interest rate by transferring the loan. While it can help reduce your interest outgo and restructure the loan, it can also help you acquire extra funding without complex paperwork. Here are a few aspects of home loan balance transfer to be aware of.

 

How does a home loan balance transfer work?

When you apply for a home loan balance transfer, you avail a new home loan. Once your loan is approved, the new lender pays off your outstanding loan amount. When your old loan is foreclosed, you can pay the remaining EMIs on the revised interest rate.

 

What are the benefits of switching your loan?

By transferring the home loan after careful consideration and analysis, you can repay the loan faster and even save money on them. Here are some benefits of home loan refinance:

  • You can reduce your interest rates and thus your total cost of borrowing
  • You can change your tenure to get a suitable EMI
  • You can get facilities like top-up loans that can help you acquire more funds and save money.

However, before opting for a home loan balance transfer, it is prudent to use a home loan refinance calculator to ensure that you get substantial savings from transferring your loan. 

 

How can balance transfer help acquire extra funds?

Many lenders offer top-up loans when you apply for a balance transfer. With this facility, you need not apply or go through the formalities and documentation of availing other loans from scratch. The lender offers top-up loans over and above the home loan amount, which you can use to fund your additional needs.

 

How can you get a top-up home loan?

  • You must have a reliable history of repaying all loan amounts on time
  • You must have a healthy credit score
  • You must have repaid the home loan amount for a qualifying period, which can be six months to one year

 

The top-up loan amount can vary based on the mortgaged properties amount, number of EMIs paid and your current home loan, eligibility and credit score. Similarly, the parameters for top-up loan tenures also change based on your lender and financial profile. The lender can also have a limit on the amount of top-up loans you can avail.

A home loan balance transfer is an easy way to get rid of your older loan and acquire extra funds for managing your expenses with ease. With these funds, you can meet your financial needs without availing other unsecured loans. Moreover, if you use top-up loan for home renovation, repairing or refurbishing, you can also avail tax benefits.

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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.