Home loans are big-ticket financial products that span across decades. This is why even a slight difference in their interest rates can significantly affect your finances. Therefore, lenders allow you to transfer your loan for lower interest rates or better features. However, you must do a cost-benefit analysis before opting for a transfer balance to ensure that it is beneficial for you.
Ahead, we explain what is a home loan balance transfer and why you should opt for a calculator before you make the switch.
What Is a Home Loan Balance Transfer?
In the home loan balance transfer facility (also known as home loan refinance), the lenders allow you to switch your loan to another lender. When you opt for this facility, you foreclose your existing loan and continue the loan with the new lender. The new lender pays the remaining loan balance to the existing lender and requires you to pay the remaining EMI to them.
What Is a Home Loan Balance Transfer Calculator?
A home loan balance transfer is an online tool that helps you calculate your savings from the balance transfer. You can find the home loan balance transfer calculator online on different home loan lenders’ websites. Following are the steps to use a balance transfer calculator –
- Enter the name of the existing home loan lender
- Enter your loan tenure, including the date when it started and when it would end
- Input the location of the property
- Now put values of the total loan amount sanctioned, the remaining repayment tenure and the existing loan interest rate.
- Enter the interest rate of the new lender.
- Click enter
- Your savings and the amount of the new loan you are eligible for will be displayed.
- The amount of top-up loan you are eligible for would be also displayed if the new lender provides a top-up loan.
Benefits of a Balance Transfer Calculator
There are various costs involved with balance transfer that can dilute your savings. Therefore, it is vital to know if there would be substantial savings by transferring the loan, before initiating the process. A home loan balance transfer calculator helps you do that. Following are some of the benefits of a balance transfer calculator –
- It is easy to find the calculator online and even easier to use.
- It helps you to ascertain the amount of savings you would make.
- It helps you do a cost-benefit analysis of switching the loan to determine if you should proceed with the transfer.
- With this calculator, you can also know the EMI value of the new loan after the transfer.
- Using a balance transfer calculator can help you make informed decisions and save money.
Before using a balance transfer calculator, you must consider a few things related to balance transfer. You must transfer your loan only when the existing loan has a significantly higher interest rate than the new loan. Transferring your loan for a minor difference in the interest rate might not help you save much. Similarly, it is suggested to switch your loan in the initial years when the loan amount and the interest component is higher. Experts opine that you should avoid opting for a balance transfer at the end of the tenure.