Lenders decide the loan against property terms and conditions based on several factors, such as income, debt-to-income ratio, credit score, etc. All these factors are essentially variables. An individual's income can increase over time, practicing strict financial discipline can help them improve their credit score and once their income permits them, people can pay off some loans and also reduce their debt-to-income ratio. In short, it is very likely that people can become eligible for better loan terms and conditions only a few years after they have availed themselves of a loan. In such a case, getting their loan refinanced and choosing to go with a lender willing to offer better terms and conditions on the loan may be a good idea.
Loans against property or property loans are long-tenor loans. In general, borrowers choose anywhere between 15 to 20 years to repay these loans. Due to the long tenor involved, even a minor difference in the interest rates can make a huge difference to the total interest payout and cost of borrowing. Therefore, loan-against-property borrowers must choose to go for a property loan balance transfer if they find another lender willing to refinance their loan at a lower interest rate.
However, there are a few key things one must keep in mind when deciding to vote in favour of or against a balance transfer. To start with, lenders treat all loan against property balance transfer applications as new loan applications and therefore, the fate of your application will depend on whether or not you meet your new lender's eligibility criteria. Second, if a lender decides to refinance your loan at a lower interest rate, know that they will charge a property loan balance transfer fee. This fee will vary between .5% to 2% of the loan amount. Negotiating may help you reduce the loan against the property balance transfer fee. However, there is no way you can avoid paying it. Third, a loan against property balance transfer can help you save money. However, only if there is at least a 25bps difference in the new and old interest rates when the remaining tenor is 10 years. Such a difference is enough to help one cover the loan against the property balance transfer fee and also save some money.
If you are planning to get your home loan refinanced, we recommend using a loan against property balance transfer calculator, which is an online tool that lets borrowers calculate within seconds the total money they will save by opting for a balance transfer. Loan against property balance transfer calculators are easily available on the internet. They are free to use and they help save time and energy and also aid with decision making.
If you are planning to opt for a loan against property balance transfer, before talking to any new lenders, talk to your current lender first and see if they will be willing to renegotiate the terms and conditions of your loan with you. If they do agree, you will be saved from having to pay the loan against the property balance transfer fee. If they decline your request, make sure to get an NOC from them. Without the NOC from your current lender, your new lender won't be able to process your request.
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