Home/ Money / Personal Finance/  Is it a good time to opt for a home loan balance transfer amid the prevailing rate cycle?

Since May 2022, the RBI has brought up the key repo rate six times by a total of 250 basis points in an effort to stabilise inflation in the nation. At the most recent MPC meeting last month, the RBI increased the key repo rate by 25 basis points to 6.50 per cent, which prompted lenders to raise interest rates on loan products like home loans. Banks and home lenders are giving special rates before the fiscal year ends to tempt customers, despite the rising home loan interest rates. 

Two banks, Bank of Maharashtra and Bank of Baroda have lowered the interest rates on their home loans despite rising interest rates. Home loan processing fees have been waived by Bank of Baroda and rates have been reduced by 40 basis points to 8.5%. As opposed to Bank of Maharashtra, which last week lowered its home loan interest rates by 20 basis points to 8.40%, making it one of the lowest in the sector. 

For customers who apply for a loan with a credit score of 760 or higher and receive disbursement (part or full), HDFC has launched a special home loan offer at 8.70%. The preferential rates offered by these institutions are, however, only good through March 31, 2023. So, borrowers who were planning to purchase their dream house should choose balance transfer home loans given the current rate cycle. Let's get viewpoints from various sector specialists.

CA Manish P. Hingar Founder at Fintoo 

Amid sluggish demand caused by recent interest rate hikes that have made home purchases more expensive, some banks and financial institutions are offering special rates to lure customers before the end of the financial year. This opportunity can be utilized to transfer the outstanding loan balance amount.

Balance transfer home loans can be a good option if you are looking to save money on interest payments. A balance transfer home loan allows you to transfer your existing home loan to another lender who offers a lower interest rate. This can help you save money on interest payments and potentially reduce your monthly payments as well.

However, extending the tenure while transferring may nullify the gains, so it is recommended to avoid doing so.

Before you opt for a balance transfer home loan, there are several factors to consider. First, you need to make sure that the new lender offers a lower interest rate and that the savings you will get from the lower rate will offset any fees associated with the balance transfer like processing fees, prepayment charges etc.

Second, you need to consider the terms and conditions of the new loan, including any penalties for early repayment, fees for late payments, and other charges. If you can obtain a lower interest rate of at least 35-45 basis points, it may be worth considering switching your home loan.

Finally, it is important to consider your long-term financial goals and whether a balance transfer home loan aligns with those goals or not. Before making a final decision, it is important to weigh all the pros and cons and negotiate for better loan terms.

Anshu Agarwal, Global Head of Finance at Branch International

As we all know with the latest series of increases in Repo rates Interest on home loans has increased. However, there are banks which are offering low-interest rates. Is this a good time to transfer your home loans or take a new one? Well, it all depends on all the terms and conditions of the existing and new lenders. 

What is the processing fees, What are the foreclosure charges for the existing lender and New lender? You should also look for reviews of the new lender. A lot of vendors provide home loans at a lower rate and then eventually increase it over time. If all looks good you should opt for the new lender as this will reduce your EMI.

Mahesh Shukla, CEO & Founder, PayMe

A balance transfer home loan is an option that allows you to transfer your existing home loan to a new lender, who then pays off your old loan. This can be a good option if you're looking to save money on interest or if you're unhappy with your current lender's service. If several banks have cut interest rates on home loans, this could be a good time to consider a balance transfer home loan. 

However, before making any decisions, you should carefully evaluate your financial situation and goals, and compare the terms and conditions of different lenders to find the one that best meets your needs. It's also important to note that balance transfer home loans often come with fees and charges, so you should consider these factors in your decision-making process. 

Additionally, you should ensure that you meet the eligibility criteria of the lender you are considering and that you have a good credit score, as these factors can impact your ability to obtain a balance transfer home loan. Ultimately, whether a balance transfer home loan is a good option for you will depend on your individual circumstances, so it's important to do your research and consult with a financial advisor if necessary.

Pramod Kathuria, Founder & CEO, Easiloan

Recently, a lot of banks have slashed their respective interest rate, the offer is applicable for limited time. This could be a great opportunity for the home loan buyers as well as existing customer to save money by reducing EMI cost associated with the same.

However, before deciding to go ahead, the customer are requested to review the terms and conditions carefully. Here are few points to check before proceeding ahead –

Processing Fee – The banks charge certain % of fee when you apply to a new bank. This can be significant expense while shifting the loan.

Prepayment Fee – Some bank charge certain % in case of pre-payment of your loan before the end of tenure. It may vary from bank to bank.

Impact on Credit Score – Every time you apply for a loan, it gets recorded in your credit report.

Important to way the all the factors before making any decisions; reach out to financial advisor if you want.

Ameet Venkeshwar, Business Head, LoanTap

Balance transfer loans can be a smart financial move for those looking to manage their debt more effectively. Due to the increase in repo rate the interest has gone up on the existing home loans but banks and financial institutions are still onboarding new customers at a lower rate.

This makes balance transfer loans a very attractive option to explore. The lending space is evolving and customers now have access to multiple options with more banks and financial institutions providing home loans at attractive interest rates.

Anirudhha Bose, Chief Business Officer

Before rushing in to transfer your home loan, do keep in mind most home loans are offered at a floating rate - so the attractive interest rate that’s being advertised by the new bank may be just be an inaugural offer or a “hook". Being a floating rate loan, the initial rate is subject to change and there’s no guarantee that it will not rise back to the level of your previous lender’s rate! 

However, if the new loan is being offered to you at a fixed rate that’s lower than your current lender’s rate of interest, it makes the transfer a lot more lucrative. Also, keep in mind that you will end up incurring pre-payment charges with your current lender while transferring out your loan, so do the math and make sure that the charges you’ll be incurring while closing out your old loan don’t actually exceed the interest saving you’ll make on the new one. 

Typically, it makes sense to transfer a home loan to a lower interest one only if a good chunk of the loan is still outstanding. If you’re approaching the end of your loan tenure, it the charges you’ll end up bearing will probably outweigh the cost saving on the new loan.

Nitin Purswani, CEO Medius AI

It could be a good time to opt for balance transfer home loans, especially considering that several banks have recently cut interest rates on home loans. By transferring your home loan balance to a new lender with a lower interest rate, you may be able to reduce your monthly payments and save money over the life of the loan. 

However, it's important to carefully consider all the fees and charges associated with the balance transfer, as well as any prepayment penalties or other terms and conditions that may apply. Additionally, it's crucial to assess your financial situation and determine whether a balance transfer makes sense for your specific needs and goals.

Sumeet Srivastava, Founder & CEO, spocto (a Yubi company)

It is not just interest rate but a variety of things one should consider while transferring loans - your Current Credit score, the total tenure, the outstanding interest you paid & the period for which you want to retain the property, and so are some of the parameters one should leverage. In our recommendation, talk to your existing lenders and their offers for changing rates rather than going for a new lender. Re-negotiation with your current lender is normally the best way.



Vipul Das
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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Updated: 22 Mar 2023, 05:57 PM IST
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