INSUBCONTINENT EXCLUSIVE:
Your chances of getting approved for a home loan of shorter duration is higher.Are you feeling the pinch of your home loan EMIs or equated
monthly instalments If yes, then you can lower the rate of interest of your home loan by transferring it to another institution
Balance transfer or simply transfer means shifting an existing loan to another lender by paying off the previous lender in full, and
Although all types of loans, e.g
personal, auto, education or home loans, are eligible for transfers, home loans remain the most ideal for a transfer as the quantum and the
looking at transfer of his/her home loan if one is not satisfied with services of the existing lender, for instance, if a bank is slow to
react in reducing interest rates when the Reserve Bank of India (RBI) reduces the policy rates
"There are instances where the RBI had reduced the repo rates significantly but on an average only half of the benefit of this reduction was
passed on to the consumer by the banks, says Rahul Agarwal, director, Wealth Discovery/EZ Wealth.A borrower can reap maximum benefit on a
home loan transfer if the remaining tenure of the outstanding loan is higher, e.g
if the borrower has only paid off two years of an existing twenty-year home loan
For longer duration loans, even small a difference in the interest rates can result in aa significant amount of savings (table), says Mr
years4,825,863Total Cost of Transfer (1% Processing Fee Rs 3, 000 Misc
remaining)Current EMI48,251Balance Principal to be Transferred after 15 years22,70,955Total Cost of Transfer (1% Processing Fee Rs.3, 000
discussed above, it is amply clear that transferring existing home loans towards the far end of the loan's tenure is not advisable," says Mr
Any refinance exercise should only be undertaken if the present value of the interest rate savings is higher then the upfront cost because
even though there would be a difference in the interest rates, the savings are just not significant enough to be worth the hassle a home
a bank's perspective, losing any client is bad business as there are significant costs incurred in the acquisition of accounts, therefore in
the probability of repayment and the liquidity of the collateral in case of a default
When it comes to home loans, in addition to the credit profile of the borrower, the type and location of the property is an important
criterion while making a credit decision," says Mr Agarwal.Some of the common measures that banks use while assessing a home loan
application are:Credit history: An applicant's CIBIL score is considered the most important benchmark and generally a score higher then 800
which are considered more stable in nature, such as jobs in government sector and PSU banks
Employees working in multi-nationals, and occupations like doctor and chartered accountant are also favorable from the bank's perspective,
the age group of 30-50 years) are most preferred candidates as they are considered more financially stable and have more working years ahead
Banks prefer people who opt for a repayment period of up to five years, and the weightage falls to half if the repayment is between 10 and
15 years, and is the lowest for a repayment period of 20 years
What it means is that opting for a shorter duration increases your chances of getting a home loan application approved.
