Many people who have taken on a home loan believe that when the loan is approved, signed, sealed and disbursed, they’ve locked in the home loan interest rates and the benefits that come with it. This seems harsh with the rise in inflation and expenses. However, when you have taken on a home loan, you do have the option to transfer your home loan to another bank which offers a better interest rate and benefits.
But before you transfer your home loan, there are 5 points you need to consider, as follows –
- Negotiate the lowest possible home loan interest rates
Before transferring your home loan, it is prudent for you to negotiate the home loan interest rates with your current home loan provider. Given your relationship with the bank, your credit history and certain other factors, they could consider re-negotiating a deal that could prove beneficial to you and save you the hassle of transferring the loan.
- Gauge your credit rating
When you’re in the market to transfer your home loan, you first need to assess your credit rating. Your credit rating tells the potential home loan provider how much of a risk you are. Do you pay your EMIs on time? Have you defaulted so far? If yes, how frequently have you defaulted? If your credit rating is poor, your home loan eligibility suffers as they are less likely to take on your loan. To ensure that you do not face this problem, pay your credit card bills on time and make your EMI payments as per schedule.
- Research the market for better home loan interest rates
It pays to do your homework. When you’re in the market for a better offer on your home loan, you need to do your research. Using a home loan EMI calculator, understand what your ideal EMI should be, given your financial status and requirements, and accordingly search for a home loan provider that can match it or come close to it.
- Understand the costs associated with transferring your home loan
While it is tempting to constantly keep an eye out for a better interest rate on your home loan, transferring your home loan does come at an extra charge. Processing fees, inspection fees, administration fees, application fees, are just some of the costs that you will incur during the process. You’ll have to pay a fee to both, your existing home loan provider and the one you are transferring your home loan to. Calculate how much transferring will cost you and only if it is still less than your existing interest rate should you make the change.
- Opt for a Repo Linked Home Loan
A repo linked loan is a loan where the interest rate is linked to RBI’s repo rate. This implies that when the RBI lowers the repo rate, banks that offer this type of loan, lower the interest rate. As a borrower, you will immensely benefit every time the RBI cuts the repo rate as it will lower the EMI that you pay. If you originally opt for this type of a home loan, you may not even need to transfer your home loan as the RBI has increasingly been cutting the repo rate to encourage borrowing.
There are many ways to lower the EMI burden when you take on a home loan. The key is to remain smart, patient and vigilant with everything that is on offer. What shines isn’t necessarily gold, and home loan schemes that offer you the entire world on a platter, may not be the right one for you. Make a decision to transfer your home loan, only if it benefits you in every way. Do your research, or get in touch with an expert.