Finance

Refinance Your Loan Against Property With A Balance Transfer Facility

Property loans come with several attractive features that make them suitable to borrow and repay. The loan against property balance transfer facility is one such crucial feature that a prospective or existing borrower must know about these advances. The introduction of the balance transfer facility has typically been a turning point for borrowing patterns among people, impacting critically how they used to avail and repay these secured advances.

Lately, the property loan balance transfer facility has gained significant popularity among borrowers for the overall convenience that it offers. Let’s check out some essential details related to the facility for a better understanding. It should also help make loan repayment convenient and affordable for you.

Meaning and Scope of Loan Against Property Balance Transfer Facility

A loan against property balance transfer is a refinancing facility that allows you to switch your property loan outstanding to a new lender. The prime benefit of such a facility is that it allows you to refinance your remaining loan amount at a lower rate than the one you are currently paying at, as offered by the new lender.

The balance transfer facility allows refinancing of the loan principal outstanding. So, once you have availed the facility, your interest payable and other possible charges cease to exist beyond the day of such transfer. The liability then completely shifts to the new lender and the borrower is liable to repay the advance to them only. Towards such settlement, the old lender provides a No Objection Certificate that confirms the transfer and releases the borrower of any such liability held on to them.

A balance transfer facility thus also creates a fresh agreement of the borrower with the new lender. Since the process involves complete redrafting of the loan agreement, the lender is leniency to provide better terms to the borrower than the previous one.

In case you have had credible past records of loan against property repayment until the refinancing and hold high eligibility, you are likely to receive the agreement with improved terms. You can also leverage these aspects to negotiate for better terms of your loan along with the mortgage loan interest rate levied.

When Should You Go for Property Loan Balance Transfer?

As per the rules related to the loan against the property balance transfer facility, one can choose to refinance their advance only after having paid a certain number of EMIs towards total loan repayment. The number of EMIs one needs to pay for the purpose varies from one lender to another.

Additionally, there’s another aspect that you need to consider that would help to best time your property loan balance transfer decision. In case a refinancing option is available at lower rates than your current levy, it is best to go for it at the earliest.

It is for the critical reason that the EMIs payable for these loans are front-loaded, meaning that the mortgage loan interest component for each EMI is higher than the principal component. The interest amount goes on to decrease as the tenure advances, letting the borrower pay principal value proportionately. Lenders front-load their EMIs to cover for the risk of non-repayment, default or delay in the repayment schedule. Hence, it is ideal to choose to go for a balance transfer facility early on to save on interest. Otherwise, you will have paid higher proportionate interest than the principal repayment.

When seeking to time your loan against a property balance transfer, you can take the help of an EMI calculator. The financing tool computes the amortization schedule reflecting a clean break-off of each EMI into its principal and interest components. It also computes the total loan principal and interest outstanding after each year of tenure completion so you can determine when to make the balance transfer to best save on the total interest liability.

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