A home loan can be with you for many years and even a small difference in the interest rate can make a noticeable difference to the total amount you pay back. If you have been servicing your current loan for a while and you find that another lender is offering better terms, then you might want to explore a home loan balance transfer.
But don’t base your loan decision solely on the interest rate. You need to factor in the remaining loan amount, tenure, EMI and the charges related to transfer to see how much you can actually save. To simplify the comparison, you can use a home loan balance transfer calculator.
What is Balance Transfer for Home Loans?
A home loan balance transfer is the transfer of the outstanding balance of your current home loan from your existing lender to another lender. The new lender pays the existing lender the outstanding amount, and you make the loan payments under the new terms.
When borrowers get a lower rate of interest or the repayment terms are more suitable to them, they can opt for home loan transfer.
But there are also costs that come with transferring a loan. Therefore, it is important to compare the potential savings against the costs involved before making a decision.
A Home Loan Balance Transfer Calculator is a tool that helps you calculate the savings you can make by transferring your home loan balance from one lender to another.
Home Loan Balance Transfer Calculator An online tool that helps you estimate the potential difference in EMI and total interest if you decide to transfer your existing home loan.
In general you will need to enter details such as:
- Loan amount outstanding
- Current interest rate
- Loan tenure remaining
- Interest rate new
- Length of time you will be with the new lender (estimated)
Based on these details, the calculator can provide an estimate of the revised EMI and possible interest savings.
How the Calculator Can Help You Estimate Your EMI Savings
Your EMI is calculated on factors like outstanding principal, interest rate and tenure of the balance. Your monthly repayment could be lower if the new lender offers a cheaper rate.
A home loan balance transfer calculator can help you compare the existing and proposed loans by entering the existing and proposed loan details. This way you can get a better idea before you start the actual transfer.
For instance, if you have a large outstanding balance and many years remaining on the loan, even a small reduction in the interest rate can make a difference to the overall cost of repayment.
How Do You Calculate Interest Savings?
A major reason for a home loan transfer is the possibility of paying less interest over the long run.
The calculator can help you to compare the estimated interest on your existing loan with the interest payable on the proposed loan. The difference will give you an idea of how much you could save.
But that’s not all there is to the calculation. Take into account the processing fees, administrative fees, legal fees and any other fees associated with the transfer of the loan.
Only after subtracting these expenses from the estimated savings do we get a better idea of the real benefit.
Home Loan EMI Calculator Vs Balance Transfer Calculator
A standard home loan calculator is used to calculate the mortgage EMI and the interest payable on a home loan based on the loan amount, interest rate and tenure.
A home loan balance transfer calculator, in contrast, is all about an existing loan. It helps compare the current loan with a potential new loan.
Both tools can be useful at different points. A home loan calculator can assist with initial borrowing decisions, and a balance transfer calculator can assist you to determine whether it makes financial sense to switch lenders.
When Should You Choose to Transfer Your Home Loan?
There is no one time that all borrowers should refinance a loan. It is contingent upon the balance left, tenure, current rate of interest, new rate and the charges involved.
Thinking about a home loan balance transfer? It might be worth it if:
- A significantly lower interest rate is available.
- There is still a big balance of loan to be repaid.
- “The loan that we have is still good for a few more years.
- The new lender has repayment terms that better suit your needs.
- The expected savings exceed the costs associated with the transfer.
- Things to Verify Before Transferring Your Home Loan
Don’t just look at the new interest rate: Compare the overall cost of transferring a home loan, Look at the:
- Principal outstanding
- Time to maturity
- New EMI
- Total interest to be paid
- Processing and other applicable fees
- Terms and conditions of the new credit
You can first use a home loan balance transfer calculator to help you make this comparison with greater clarity.
Summary
If you are thinking of transferring your existing loan to a different lender, a home loan balance transfer calculator would be a good start. It helps you compare EMI, interest costs and potential savings between your existing and proposed loan details.
Before you proceed with a home loan balance transfer, ensure the projected savings justify the costs involved in the transfer. You can also optimise your finances and get a better idea of your repayment options with the help of a home loan calculator along with the balance transfer calculator.
