Home loan transfers are often an attractive financial solution to homeowners who need to lower their monthly debt repayments or consolidate multiple loans into one payable monthly amount. Typically, this can be done by refinancing a home loan with a lower fixed interest rate, thereby lowering the overall monthly repayments. However, there are many disadvantages of taking out a home loan transfer as compared to refinancing an existing home loan. Here we will look at some of the pros and cons of transferring your home loan. Home loans generally are long term loans that go up to thirty years and usually people incur a high amount in paying it annually.
The biggest benefit of opting for a home loan transfer is that it helps you reduce your monthly debt by shifting it to a new tenure (i.e. term or graduated repayment). This reduces the burden associated with paying off a lot of interest over a long period of time. Moreover, opting for a shorter term loan enables you to save on interest payments, which can help you save on your EMI. You can easily opt for a longer tenure when opting for a home loan transfer.
Another major advantage is that home loan transfers are not always covered under EMI cover provided by financial institutions. In case of a default by a borrower against his home loan, the current lender may refuse to give him further financial assistance unless he first refrains from making another application for a similar loan from another lender. Financial institutions do not provide any tax benefits as they allow only a limited amount of EMI as deduction.
Opting for a loan transfer facility also helps a person to reduce the hassle involved in repaying loans and dues. Instead of managing multiple accounts at different banks, one bank provides an outstanding amount at the same time. However, you need to be a minimum of 18 years of age to avail this facility. In case you have a co-signer, it would be beneficial for him too.
The home loan balance transfer is not without any disadvantages. One obvious disadvantage is that the person who owes money to another bank gets a reduction of his outstanding amount. Though the banks share some benefits with the borrowers, there is a reduced amount of benefit if the borrower makes use of the home loan balance transfer. The rate of interest applicable on the transferred balance is also usually higher than the rate of interest applicable on the outstanding balance.
Home loan balance transfer may also be an appealing option for people who have good credit rating. However, it is important to note that the best time to opt for a home loan balance transfer is during a boom in the economy. When the interest rates are low and you can get significant discounts, it makes sense to shift your balance to another bank. If you make use of refinancing, you can pay your outstanding amount with comparatively low rates. This will help you save a significant amount of money on the interest.
As mentioned earlier, opting for a home loan balance transfer also gives you the option of shifting your high cost from one account to another. The better benefits that you can get include lower payments and higher cash flows. The reason behind this is that the cost of living has fallen considerably. However, be sure to compare the costs of transferring your balance between different banks before opting for it.
The recession and the financial turmoil have made many people jobless. Many borrowers face the threat of losing their jobs when the interest rates increase. The falling economy and the low or zero interest rates make it difficult for borrowers to make ends meet. It is advisable for those who are looking to secure their future to take advantage of home loan balance transfers. Opting for these options will provide better benefits to those who are unable to pay their high repayments every month.