What is the Right time to Transfer your Home Loan to New Lender?

You can shift your Home Loan from your existing lender to another lender, anytime. However, you should first know whether the time to move your loan is suitable. Read this post to learn the indicators that can help you decide.

Home Loan repayments are usually a long-term financial commitment that can last for 15 to 20 years or even more. Therefore, it is important to regularly monitor your loan account and look for opportunities that can benefit you in repaying your Home Loan liability.

Home Loan Balance Transfer

You may not keep your loan account in the same bank for the entire duration. While you can renegotiate with the existing bank for a better deal, you can also transfer the Home Loan to a new lender who offers you the required loan at more favourable terms. This process is also known as a Home Loan Balance Transfer or Home Loan Refinancing.

When you shift your Home Loan to another lender, the new lender pays off the unpaid loan amount and prepayment charges, if applicable to your existing bank, thus closing your existing loan amount. Now, your new loan repayment account is opened with your new lender with fresh terms, where you pay the rest of your Home Loan EMIs.

Factors to consider before deciding the right time to transfer your Home Loans:

1.Latest monetary policies of the RBI

The RBI periodically adjusts its vital monetary policy rates to stabilise the economy. Apart from regulating the economy, these policy rates can also affect your loan repayment. For example, home loan interest rates might reduce as a result of a reduction in the bank rates and the cash reserve ratio.

2.Credit Score

A good credit score can influence the new lender to offer you better terms for transferring your Home Loan. Therefore, ensure that you have a high credit score, preferably more than 750, before considering a Home Loan transfer to a new lender.

3.Research

It is not possible to frequently change your lender. Therefore, it is important to do proper research before finalising the right lender.

Furthermore, apart from cheaper Home Loan rates, you should also consider the associated factors, like reputation of the new lender, quality of service, and charges associated with the loan offered.

4.Outstanding Loan Amount

It would be impractical to refinance your Home Loan if the unpaid loan amount is small. In such a case, it is better to keep your loan account with the existing lender and save yourself from unnecessary hassle.

However, you can consider transferring your Home Loan to a new lender if you have a significant outstanding loan amount that can help you bag a better deal, from your new lender.

5.Use an EMI calculator

The ultimate goal of this whole exercise is to secure an affordable EMI. You can visit the official website of the new bank and use their free online home loan EMI calculator to know how much EMI you will have to pay.

6.Charges of Home Loan Transfer

On transferring your Home Loan, there are major charges, such as stamp duty and processing fee, which are attached to the Home Loan balance. There are other charges, such as technical fee, documentation and legal charges that vary as per the lender.

Therefore, before transferring the Home Loan, it is vital to sum up all the charges.

The Verdict

At present, the RBI has kept bank rates and CRR low for making Home Loan cheaper. Therefore, you might consider shifting your old loan to a new lender.

However, you are the best person to decide whether to refinance your Home Loan or stay with your existing lender. You can now make an informed decision by creating a checklist based on the abovementioned factors.