In an age where our expenses are gradually soaring, high EMIs can make budgeting extremely difficult. Thankfully, balance transfer enables you to reduce the EMI amount and get maximum home loan tax benefits. A home loan balance transfer is not always as lucrative an offer as the new lender wants you to believe. On the positive side, a home loan balance transfer can help you to save money. However, on the flip side, it can sometimes reduce home loan tax benefits, spoil your relationship with the previous lender, and in the worst case, your financial liability may increase.
To ensure the home loan balance transfer facility offers you the maximum benefits, including tax benefits, you need to keep the following factors in mind:
Explore the Possibility
While home loan balance transfer can be an excellent way to get better tax benefits and lower EMIs, many lenders do not allow the borrower to opt for such a facility. Hence, before looking for a new lender, you need to carefully evaluate the loan terms and check whether your loan is eligible for a balance transfer. If you find that your loan is ineligible, a better way would be to negotiate with the lender.
Negotiate With Your Lender
In the highly competitive lending industry, no lender wants to lose customers. Before enquiring from a new lender, try to negotiate with the current lender and see whether there is any possibility of an interest rate reduction. Generally, lenders may offer you better rates if your credit score is high and you have been a regular payer. You should also keep an eye on the home loan tax benefit before accepting the new terms.
Find the Best Lender
If none of the above-mentioned points works for you, you may go ahead with the balance transfer. The best way to approach balance transfer is by looking for a lender offering the lowest rates. Sometimes, the lender may run special promotional offers during the festive season. You can often get the best home loan interest rates during such promotional events. Remember, the balance transfer facility should offer higher home loan tax benefits and not otherwise. Also, trust reputed lenders who have been in business for very long and have a solid customer base. Such companies usually give you the best terms and offer value-added benefits, such as doorstep service delivery and flexible repayment plans.
Check the Transfer Costs
Unlike home loan tax benefits, a balance transfer is not free. There are several costs like application fee, loan processing fee, and administrative charges. Additionally, the previous lender may charge some fees for transferring the loan to the new lender. Hence, before opting for the balance transfer facility, it is wise to calculate the total cost and see if the savings are reasonably high to justify the balance transfer.
A home loan balance transfer may help you from paying sky-high EMIs. However, before opting for a balance transfer, calculate your effective savings. For example, if you plan to change your lender in the latter half of the loan term, the chances are high that you have already paid a major part of the interest. Opting for a new lender will only mean paying the interest all over again. Additionally, any increase in the actual cost of EMI will reduce the home loan tax benefits you received over time.
Hence, before opting for a home loan balance transfer, evaluate both pros and cons and make the right decision.
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