28 SEPTEMBER, 2021

If you are reading this, you might know about the home loan balance transfer facility. With this feature, you can transfer your home loan from one lender to another if you come across lower interest rates or better features with them. Transferring your housing loan can help reduce your home loan interest rates and save money in the repayments. However, there are many myths surrounding home loan refinancing that can deter you from switching your loan.

Here, we have busted those myths to help you make informed decisions.

Myth: You cannot refinance with any other lender

You can refinance with any lender you like, as long as the lender is licensed to lend a loan. It is only a myth that you must refinance with your lender. You are not legally or morally bound to refinance your home loan with the existing lender. You can switch your loan with another lender who offers you lower interest rates and better facilities too. However, your existing lender can lower the home loan interest rates to retain you. If it happens, you can choose not to transfer your loan and save on the transfer cost.

Myth: Home loan refinances hardly makes any difference in your savings

Home loan interest rates keep fluctuating all the time, and you might be paying a higher interest rate. Loan refinancing allows you to take the benefit of lower interest rates. Even if the difference in the interest rate is small, it can make a huge difference in the total outstanding amount owing to the high loan amount and tenure of the loan. In addition, you can get facilities like overdrafts and top-up loans that can help you repay faster and save money on the loan.

Myth: You should refinance as soon as you see a drop in the interest rate

A drop in the interest rates should not be the only criteria to opt for home loan refinance. There are various costs involved with home loan balance transfer that can dilute the savings. Before you opt for loan refinance, you should do a cost-benefit analysis to determine the savings. If the cost of transfer is higher, it is advisable to stick to your old lender.

Myth: You can opt for a home loan balance transfer despite your poor eligibility

Your eligibility plays an important role while transferring the loan. When you switch your home loan, the new lender considers your loan as a fresh application. Therefore, they carefully consider your eligibility and repayment capacity. You should be eligible as per the standards of the new lender to transfer your loan. Similarly, you must have a high credit score to be eligible for the loan refinance. 

Such myths can stop you from availing the benefits of refinancing your loan. Refinancing your loan can help you save lakhs of money. Therefore, you must talk to an expert if you have any doubts instead of believing such myths and false information. Moreover, you can always check your savings from home loan refinance with a home loan balance transfer EMI calculator

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.