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In this festive season all lenders are offering their lowest interest rates on home loan. New home loan along with balance transfers are also eligible to get these offers. Home loan transfers are common nowadays. Some lenders also do not charge any prepayment penalty for shifting a home loan. But before switching a home loan, one must check these nine important points and then proceed. If borrowers are paying a high-interest rate on the existing home loan, then switching the loan to a lower interest rate lender will help the borrower in the long run, especially on the interest outgo.

9 points to remember 

1. To save on the interest cost, it is always better to switch the loan early on during the tenure. Do not wait for a far better offer, if you already have something in hand.

2. If your home loan repayment tenure is less than five years, do not go for balance transfer. Try to switch it within the first five-seven years.

3. Be alert and crosscheck before opting for a balance transfer. Do not go for attractive advertisement. Read all rules and regulations before opting in.

4. A loan transfer will not be possible if there is an irregular repayment with the borrower’s current lender. So, you should have a clear track record of paying EMIs.

5. Check for loan foreclosure charges. These are the charges that are levied by banks for early closure of loan, and some processing fee is charged by the new bank where the loan is being transferred.

6. Keep in mind that the processing fee and other fees to the new lender can also be negotiated and waived. So, talk to the new lender.

7. To avoid any hassle in future with the current lender, get a detail loan statement since beginning from them including your documents if anything is with them.

8. If you have a top up home loan then inform new lenders of this. Try to convince them to make a suitable and easy repayment schedule.

9. Before switching a home loan, you should calculate EMI tenure, EMI amount and interest outgo. Find out whether you are benefiting in all these three aspects. Go for the switch if you are. Else, think twice before you proceed.

Bottom line

Since home loan balance transfer requests are treated as fresh home loan applications by lenders, they levy processing fee, administrative charges and other charges associated with new applications. Thus, those are planning to opt for a transfer should calculate their overall savings including these extra charges and then proceed.

One should opt for the balance transfer option only if the overall savings in interest cost is significant enough after factoring all the extra cost involved in doing so. So, look carefully before you take the plunge.