11 MAY, 2022

Nobody likes to pay more than they owe. More so when they know of ways to save money. A home loan balance transfer is one such way to save money. When you avail a home loan at a certain interest rate, it is for the entire tenure, typically. However, it could happen that the interest rates have reduced, but you are bound to pay the same rate. Thankfully, you can opt for a home loan balance transfer to reduce the interest rate.


With home loan refinance, you can avail a new home loan with another lender at a reduced interest rate. The old loan is foreclosed, and you repay the new loan at a reduced EMI. You can get a lower interest rate, change your tenure, or even get additional facilities and services with a home loan balance transfer. However, many borrowers are reluctant to opt for a balance transfer due to various myths they hear and believe. Here are some myths that you should not fall prey to.


  • All home loan borrowers can transfer their loan

All home loan borrowers cannot switch their loans immediately. While you might have met the eligibility when you availed the home loan in the first place, you need to meet the eligibility criteria of the new lender too.


  • The loan can be refinanced only once

There is no rule stopping you from refinancing your loan more than once. You can switch your loan for the same reasons or different reasons any time after the lock-in period with your current lender is over. However, it could mean unnecessary expenses and the hassle of going through the entire process again. Consider the pros and cons of refinancing and review the overall savings before opting for a transfer balance more than once.


  • Refinancing is expensive

Many borrowers are sceptical about refinancing because they feel it is expensive. However, this is not true. Agreed, refinancing is not free. But it is not very expensive either, especially if done prudently. You would need to pay costs like processing fees, prepayment fees, or even other administration costs. However, these can be added to your new loan balance if you do not want to pay them upfront. Moreover, if you are servicing an expensive home loan, refinancing the loan with some minor transfer costs could help you save significantly.


  • Only interest rates matter

You should not opt for refinancing the moment you get lower rates. It's imperative to consider other things too. You must carefully choose the lender. Moreover, it would be best to do a cost-benefit analysis to ensure you can save enough by refinancing. You can use a home loan calculator to get accurate results.


  • You must opt for the existing lender for refinancing

Yes, experts opine that you should talk to the existing lender and negotiate the rates. You can also try refinancing the home loan with them first. However, it is not compulsory. You are free to approach any licensed lender to refinance your loan. Explore different lenders and get their quotes to get the best loan.


A home loan balance transfer can help you save significantly. However, you must proceed carefully with enough information and research. It is best to clear all your doubts with financial advisors so that myths and misconceptions do not pull you back from taking the benefit of a home loan balance transfer.


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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.