What’s More Beneficial? Home Loan Balance Transfer or Top-up Loan?

Home Loan Balance Transfer

The decision of buying a home is definitely a big step in every individual’s life. While the decision always comes with a huge sense of accomplishment, all thanks to the zooming property rates and large ticket size, not every home buyer can buy a home on their savings entirely.

With the downtrend in interest rate cycle, a significant portion of home buyers always opt for home loans to fulfill their dreams. A home loan route improves the chances of an individual to purchase a better house in a good location, which eventually comes with its own benefits. While owning a better house gives unparalleled comfort to the homeowner, it also improves the prospects of capital appreciation creating wealth for an individual over the period.

Presently, the rate of housing loan interest in India ranges anywhere between 8.70% to 12%. While the RBI, since 2014, has reduced interest rates by over 200 basis points, a customer with a home loan at floating interest rates is unable to entirely benefit from such interest rate reductions. However, there are different factors that can help such borrowers further reduce their interest rates or even benefit from additional liquidity for extra fund requirements.

Home Loan Balance Transfer

In simple terms, a home loan balance transfer is the transfer of the unpaid balance of a home loan to a different financial institution. Any business is always on the lookout of having good customers on board. Hence, such financial institutions extend highly competitive rates to take over your home loan from a different entity. While it depends on a cost-benefit analysis, given the processing charges and other aspects of transferring your home loan, if you’re in early periods of your loan or with a significant amount still left unpaid, it always turns out beneficial for individuals to transfer their home loan balance and get the benefit of reduced interest rates that can save them a good deal of money.

Top-Up Loan

The amount of a home loan is primarily dependent on two major factors viz. the market value of the property and the ability of repayment of the borrower. While the property may witness capital appreciation over time, with regular payments of home loan EMI, the outstanding principal amount reduces which helps the borrower in obtaining a top-up loan when in the need of additional liquidity.

Basis the existing records and creditworthiness of a borrower, the financial institution may extend the top-up loan facility to the borrower at nominal interest rates but a tad higher than the prevailing home loan interest rates. Top-up loans can be used for any personal reason and when in need of additional liquidity, such facility always comes in handy to the existing home loan borrowers.

Moreover, borrowers looking to reduce the interest rates on their existing home loans can even get a combined benefit a home loan balance transfer along with the top-up loan facility.

Thus, while it depends on individual circumstances, borrowers can always identify their requirements and accordingly decide to go for a balance transfer or a top-up loan or at times even both, that best suits their requirements.

Indiabulls Home Loans offers housing loans and top-up loans at attractive interest rates starting from as low as 8.70%* per annum. Additionally, even if a borrower has his existing loan in a different financial institution, they can transfer their balance home loan and obtain the benefit of a top-up loan at competitive interest rates. Visit our IBHFL Website today for further information.

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