Pros and cons of home loan foreclosure…

Mr. Sharma just switched over to a new home loan lender and was very happy as it seemed he has saved lakhs with low-interest rates, offered by the new lender which is reputed bank. However, he later discovers that he was making a huge loss in the overall costs since the lower interest rates were clubbed with longer tenure thereby making the deal of switching over to another housing loan lender rather costly on his wallets.

Although, the feeling of repaying your housing loans early or transferring the existing balance to a new lender because of unsatisfactory services, higher interest rates, no flex options for repayment is satisfying, however, you have to keep in mind certain important things before your home loan preclosure sets out to be a right decision.

Let's look at few of the circumstances under which customer may want to foreclose his or her account:

Firstly when you wish for a balance transfer to another bank or non-banking financial institute.

When you have sufficient fund availability to settle down the dues, and you like to prepay and close the loan.

• Disposing off the property.

When you fall under last two cases there is not much concern being borne by you except you need to obtain a No Due Certificate from the bank or NBFC along with your original documents of the property you own. However, if there is a closure because of a balance transfer, then there would be certain things to bear in mind.

So, let's understand the pros and cons of foreclosure of home loan due to balance transfer:

The effective interest rate: One of the main reasons for a customer to switch his or her account is the incurred interest rate. Customers, therefore, have to see that the new interest rate they get is far better than the old ones when switching the loan. They can also seek better interest rates from the current lenders if they have good payment history and track record.

Interest Rate type: Customer should check whether the offered interest rate is floating or fixed. Fixed rates have foreclosure charges. Some lenders provide a new option wherein the rates can be a combination of both fixed and floating basis. So, check with them if there are any charges incurred in foreclosure.

Loan Tenure: Again, the current lender may charge higher interest rates compared to the new lender and therefore, opt to switch the home loan. However, a customer needs to understand the calculation for the complete tenure of the loan and then decide if they interest amount paid is higher. The new lender might lower the rate of interest, but lengthy tenures mean you're paying higher interest rate amount by the end of your loan.

Processing fee and other charges: Customer will have to pay processing and other charges when they opt to transfer the loan. These minute charges become major expenses on your wallets so you should give a deeper thought for the overall costs while making a balance transfer.

No due Certificates & Original Documents

When you make your mind for a balance transfer, you should never forget to collect your no due certificate and original documents from the existing lenders. Some things to collect before you migrate to the new lender would be no dues certificates, any unused cheques, and original property document papers.

Switch your home loan but ensure it proves easier in your wallets!

Hi, I am Anurag Mishra working with Home Finance company as Home Loan adviser owing good knowledge of Home loan, Home Loans, Home Loan Balance Transfer, Mortgage Loan, Property Loan and Personal Loan so on.