Buying or building your home is an enormous task and comes with financial stress. It requires you to invest your savings of lifetime which can make it overwhelming as well even if you have dreamed all your life to have a home of your own. A home loan is the most popular means of releasing the financial stress that comes with getting a new home. The best way is to research thoroughly about the various offers of both banks and NBFCs and then make a choice for the offer that suits you best.
Another tip that you can follow while applying for a home loan is to review the home loan on an annual basis. Reviewing will involve checking offers from various banks, basically interest rates to assess whether you should continue with the current lender or opt for a better deal. Even after taking a home loan you have the option of transferring your loan for a better interest rate and tenure.
To assess whether the current home loan is going to give you the maximum benefit or not, you need to consider the following factors:
1. Loan features: You need to assess how much of the features offered by your current lender are in tune with what you need. So, when choosing the new lender, carefully go through all the features they have to offer. It could be that when you first took the loan features given by your current lender suited you but with time they are no longer benefiting you. Thus, it is better to carefully weigh all the pros and cons before applying for the loan transfer.
Some key features you should look for are:
• Offset Account: This feature would allow you to reduce your monthly payments by using your money from the savings account to invest in the Home loan. If the new lender provides this facility, then you can link your savings and loan account.
• Additional Repayment:Look for a lender who does not charge a hefty fee for making extra payments to finish the loan sooner. Generally, in the case of fixed interest loan lenders charge a hefty fee for making additional payments than the fixed EMIs.
• Redraw Facility:This facility allows you to borrow money which is already repaid on a variable interest rate. It serves as a solution in case of an emergency when you are immediate need of a significant amount of funds.
2. Rate of Intrest:In case there is a noticeable difference in the rate of interest from your current lender to a new lender then you can benefit by transferring your loan to the new lender otherwise you will end up paying more.
3. Fees:When assessing offers from other lenders calculate how much benefit you will gate and how much will the transfer cost you. There should be a significant difference between the cost and profit to make it worth it. Generally, the fee gets lower based on how much tenure is completed.
Annual review of your Home Loan will help you assess and identify if there is an area where you can possibly save more. If your lender does not agree to revise the terms, you can choose to balance transfer the loan.
Transferring in the middle of your loan tenure is not something you should avoid as it ends up giving you a lot of benefits.