Many tax deductions can encourage more people to invest in houses. Here are the home loan tax benefits that you should know about. Tax benefit for interest paid on home loan A home loan is usually taken to purchase or construct a house. These home loans are repaid in the form of EMIs (Equated Monthly Installments) over a period of time. Every EMI has two components – the interest and the principal amount. A taxpayer can claim tax deductions on the total amount of interest paid in a single financial year. For a “self-occupied” property, the maximum limit for an income tax rebate is Rs. 2 lahks. Self-occupied properties are the ones where you live. However, there is no limit for properties bought on home loans and let out. Tax benefit for interest paid for property under construction This applies when the property you bought is under construction or has yet to begin. To be eligible for such tax deductions, the construction must be completed within 5 years of availing the loan. The Income Tax Act (ITA) allows people to gain tax benefits on such types of interest, known as “pre-construction interest.” The pre-construction interest is deducted yearly on top of the total interest paid. It is deducted in five equal Installments. It is eligible from when the property was acquired to when the construction was completed. Tax benefit on principal repayment Apart from the tax deduction on the interest paid, you can also claim tax benefits on the principal amount of the EMI paid in a year. This is mentioned in Section 80C of the Income Tax Act. The total tax rebate is capped at Rs. 1.5 lakh a year. This is mentioned in Section 80C of the Income Tax Act. The maximum rebate that you can receive is capped at Rs. 1.5 lakh. Here are the conditions under which you can avail tax deductions on the principal amount of your EMI: This benefit is only applicable after the construction period is over. Unlike the tax deduction on the interest paid, this is not allowed during construction. To be eligible for this, you must not sell the house within 5 years of buying it. If you sell it within 5 years of acquisition, the deductions will be added to your total income in the year of sale. Deduction for stamp duty and registration charges Stamp duty charges amount to a huge amount when buying a property. So does the registration charge. Under Section 80C of the Income Tax Act, you can also enjoy deductions on stamp duty and registration charges. It is eligible only for the year in which these amounts are paid. Extra tax benefits for first-time home buyers There are special housing loan tax benefits for first-time buyers. As per the provisions of Section 80EE, all first-time buyers are eligible for an additional tax deduction of up to Rs. 50,000. This is separate from the tax benefits on the interest and principal amount of the home loan EMIs. Therefore, this benefits people who want to buy their first home even more. Here are the conditions under which tax deductions on the first home loan interest can happen: The loan applicant should not own any other property at the time of loan application. The house for which the loan is being taken should be their first owned property. The worth of the property should not be over Rs. 50 lakhs. The loan amount granted should be Rs. 35 lakhs or less. Tax deductions for joint home loans If the home loan is taken jointly, each property's co-owners can claim a deduction for the interest paid and principal repayment. [B-02] Tax benefit on home loan for owning a second property If you take a home loan to own a second property, you are also eligible for tax deductions. The benefit depends on whether the property is considered self-occupied or lent-out. Under Section 24(b), tax benefit available on self-occupied property is capped at Rs. 2 lakh. There is no limit to lent-out properties.
Buying a home can be absolutely exciting. It is natural to lean towards a home loan to finance your home. However, it is recommended to find the best home loan available so that you can have the best experience. While considering the interest rate offered, the capital required, processing fee, and other charges, there are a few other aspects that you should consider. Here are some tips that you can use to have the best home loan experience. [B-01] Tips For The Best Home Loan Experience By following these home loan tips, you can have a seamless experience throughout the period of your home loan. 1. Check Your Credit Score: One of the most important aspects that a bank or lender will verify is your credit score. By analysing this score, they can gauge your creditworthiness. It is recommended to have a credit score of 750 or above. Having a high credit score can also fetch you other benefits such as a decreased rate of interest. If you would like to improve your credit score, you can do so by being timely with your credit bill payments, repaying a huge debt, etc. 2. Save For Your Down Payment: Depending on your bank or lending institution, the range of down payment may vary. Usually, it ranges between 2.25% and 20% of the price of the home you plan to purchase. While designing a monthly budget, make sure that you put away the required money for your down payment. 3. Keep Your Financial Documents In Place: During the home loan application process, you will be required to submit a list of documents. Make sure that you have these documents ready and in palace so that you can speed up the application process. Make sure that you have all the mandatory documents such as ID proof, address proof, bank statements, payslips, income tax returns, form-16, and others. 4. Compare Offers: Before you choose a home loan, make sure that you compare the available offers. A few banks may offer lesser interest rates along with other benefits. Compare these offers and pick a home loan that suits your needs the best. 5. Use a Home Loan Calculator: While making sure that the requirements for a home loan application process is ready, so is planning your repayment. Using a home loan calculator is considered to be one of the best home finance tips as it helps you plan your budget in a data-driven manner. 6. Understand Details About Your Interest Rates: The interest rate that is offered for your home loan plays an important role in determining the cost of your home loan. Discuss with your bank regarding your interest rate, be it a fixed or a floating interest rate. This can help you stay prepared and estimate your repayments. 7. Get Pre-Qualified: By having your home loan pre-qualified, you can speed up the entire application process and the verification process. To pre-qualify, you have to submit your financial information such as your income, savings, and investments along with your property documents. 8. Actively Respond To Your Lender: If you are contacted by your lender regarding any further requirements or requests, make sure that you respond quickly. This can help the lender keep your loan application active and move ahead with the process quickly. 9. Understand Different Loan Options: There are plenty of options available when it comes to buying home loans. For instance, you could either choose a fixed interest rate or a floating interest rate. Ensure that you check with your lender about all the available options. 10. Maintain Your Credit Habits Throughout The Process: In the middle of the home loan verification process, lenders may check your credit score. So, it is best to continue good financial habits even while your home loan is being processed. [B-02] In a Nutshell While opting for a home loan, it is important to understand all of its associated aspects. In addition, make sure that you plan your repayment schedule in advance so that you can financially prepare yourself. If you are looking to apply for a home loan, you can apply for one with Piramal Finance and experience several benefits including quick loan sanctions.
Buying a home is the pinnacle of achievement for most Indians. It is the labor of their years of effort, sacrifices, and work. However, the modern Indian is more financially literate and savvy. Besides owning a home, many Indians have opted for real estate investing and even using business loans or other means to finance their ambitions. Let us look at some of the best cities in India to invest in real estate. This is a good time to invest in real estate. With significantly low interest rates being offered by most banks, additional interest relaxations for properties under 45L, several upcoming ‘smart cities’, and concessions being offered to developers for timely completion of projects, real estate investments are ripe for the plucking. While these might not be ideal for buying a property in metros or most Tier-1 cities, these are lucrative enough to opt for Tier-2 cities as your venue of choice. [B-01] Factors to Consider While Choosing the City While there are several considerations to be taken into account, some of the critical factors while selecting the city for investment are as follows: Employment Opportunities across sectors Healthcare Facilities Educational Institutions for diverse ages and specializations Mobility, Connectivity and Transportation Safety and Security Infrastructures, like roads, water and electricity Governance and socio-political stability Real estate price trends and future potential Top Cities for Real Estate Investment Keeping the above factors in mind, we take a quick look at 5 of the best cities in India for real estate investing, in no specific order. Navi Mumbai / ThaneWhile Mumbai might be the city of dreams, it is not necessarily known for affordable housing. The space crunch and massive population add to the woes of living in this metro. However, with its expanding borders spreading towards Navi Mumbai and Thane, the available properties are larger and far more affordable. Since these are newer areas, they can boast of well-planned societies offering the choicest of amenities. CoimbatoreCoimbatore is an already well-established industrial and education hub in Tamil Nadu. It is nicknamed the “Manchester of the South’ due to its textile industry. Lately, it has also started attracting automobile manufacturing and IT-enabled services sectors. This implies a lot of job and career opportunities, resulting in a large migrant population who will require housing and avail of other infrastructure that the city has to offer. With its affordable housing rates, investment in this city is expected to increase manifold shortly. IndoreRegularly winning the national award for the cleanest city in the country, Indore is the right mix of modern amenities with affordable surroundings. Situated in Madhya Pradesh, Indore is home to several businesses of different scales and a plethora of other facilities like education and healthcare. In fact, it is one of the few cities that has both an IIM and an IIT. Indore has the potential to provide rich returns on your investment in the next few years to come. VisakhapatnamVizag, as it is fondly known, is a major Indian port city located in Andhra Pradesh and is of strategic and economic importance to the nation. It boasts high educational standards and is one of the prototypes of the ‘smart city’ program. Following in the footsteps of its sister city, Hyderabad, Visakhapatnam has started attracting IT companies and workforce by the hordes. The great climate and lush greenery are added advantages to investing and/or residing in this city. ChandigarhReputed as one of India’s first and most well-planned cities, Chandigarh is highly regarded for its robust infrastructure and multi-connectivity options. Being a Union Territory, several tax and excise benefits can be availed here. With the new airport corridor, the surrounding areas of Mohali and Panchkula have also become rife with upcoming projects and high-rise housing societies. The lush greenery and beautiful backdrop of the Himalayas are an added bonus for a peaceful living environment. [B-02] In Summation While this list is just a guideline, you may choose any city for real estate investing based on your preferences. If you are looking for real estate financing or a business loan, visit the Piramal Finance (PCHF) website, which will help you in this endeavor.
Financing your new home through EMI gives a sense of ownness. However, it may be a costly deal but a fair one too. With property rates rising with each passing day, the thought of buying a home through savings appears to be impossible. The most common way to buy a home is through a home loan. A home loan provides you with alternatives associated with the mode of repayment. One easy repayment mode is that of Equated Monthly Installments (EMIs). An Equated Monthly Installment (EMI) is a set sum paid by a lender to a borrower in exchange for taking out a loan. For home loans, there are two sorts of EMIs: full EMI and pre-EMI. You can choose the loan payback plan based on your financial stability. Read on to understand better about Pre EMI and Full EMI. [B-01] Understanding Pre EMI Monthly payments that simply comprise the interest component of your home loan are referred to as pre-EMI. You don’t pay anything towards the principal amount when you use Pre-EMI. When your house or apartment is being built, you will be given the option of paying Pre-EMIs. As a result, a Pre-EMI is a lower payment because it excludes the main component of the home loan. Your lender will urge you to pay the EMI in full after the construction of your property is completed. Remember that a Pre-EMI is not included in the term of the house loan. Its sole purpose is to relieve you of the load of development while your asset is in the works. Understanding Full EMI The usual home loan EMIs that you pay every month for your chosen tenor is referred to as full EMIs. It consists of both the interest and the main components. If you choose the Pre-EMI payment option, the full EMI payment will begin once the construction of your home or apartment is completed. Even if the loan for your under-construction home is still being disbursed in stages, some financial institutions allow you to start paying full EMI right away. Pre-EMI vs Full EMI The following principles will help you understand the Pre-EMI vs Full-EMI financing. Loan disbursals differ: It is that if you choose full EMI, you can get the complete loan amount disbursed; however, if you choose pre EMI, the loan amount is only partially disbursed. Interest rates differ: Because full EMI interest rates are calculated on the entire principal amount. The pre-EMI interest rate is determined using the loan amounts that have been disbursed. EMI payments: In the Pre-EMI option, monthly payments begin as soon as the building begins. The home loan EMIs for the Full-EMI option, on the other hand, do not begin until the property is completed and you have possession. Impact on loan components: Using the Full-EMI option to pay each monthly instalment reduces the principal amount and length of the loan. The EMIs paid through the Pre-EMI option, on the other hand, have no effect on the principal amount, loan payback term, or interest rate. Property resale: With Pre-EMI, the borrower will be able to sell the property shortly after it is completed or within a few years. Individuals who choose the Full-EMI option, on the other hand, will be unable to sell the property for a set length of time. Impact on finances: Paying an EMI through Pre-EMI can be less expensive because the borrower only has to pay interest during the pre-construction period, which is not the case with the Full-EMI option. Tax Considerations The tax effects are the same whether you pay Pre-EMI or Full EMI. Remember that you won’t be allowed to deduct interest on your house loan until the construction of your home is finished. When you get your possession certificate, the amount you paid in interest will be totalled and deducted from your taxes in five equal instalments. [B-02] The Bottom Line Opting for EMI as an option to repay your home loan is like having a key to your home’s door lock. EMI plays a vital role in a home loan. One should be well informed about Pre EMI and Full EMI to make a prudent decision while considering Home loan EMI. Consider either one of them as per your financial suitability.
When it comes to loans, collateral is the most daunting term for people. The question seems very basic, but there always remains a lack of clarity about the various forms of properties and their applicability as collateral for a secured loan. The article you are about to read would bust all the myths and clarify the various types of properties accepted for a collateral and secured business loan. What is meant by – Collateral against Loan? Collateral can be an asset that the borrower pledges to the lender as security against the secured loan. It is a supporting medium for a loan transaction as the lender can liquidate it in case of any default in payment, and thus, it acts as a security against the amount being lent by the lender. For example, suppose you want to start a new business for which you plan to take a loan. Your lender would ask you to pledge any collateral like your property or some other kind of security like real estate, bonds, or government securities of the same or higher financial value. Further, once the lender does the assessment and is satisfied with the document, they will easily grant you the loan and fulfill your financial requirements. Various types of Collateral: Collaterals are generally classified as: – Immovable Property/Assets Liquid Assets Immovable Property/Assets are in the form of a house, residential building, or parcel of land. Liquid Assets are easily liquidated, such as Government securities, Bonds, Insurance, Fixed deposits, etc. People often believe that all forms of property qualify for a collateral loan, but this is not true. Read ahead to learn about the types of properties that are accepted for a secured loan. Types of Properties that are eligible to be collateral for the loan: Residential Properties: –The home you live in is rightly said to be your greatest asset. All residential properties qualify for a secured loan; it can be the house you live in, any residential apartment you have rented, or any other form of vacant residential property. Residential properties are the most preferred collateral for lenders, and the loan processes for these assets are highly streamlined. You can continue living in your home, and once you are done paying back all the outstanding loans, you can easily claim back the ownership rights of your residential property. A plot of land: Parcels of land in your ownership can also act as collateral, with the basic requirement of being properly demarcated for identification purposes. The rules regarding land ownership vary from state to state, so just as a matter of caution, refer to your state’s guidelines regarding land ownership. Also, the land you are pledging as collateral should not be agricultural land but free from ownership disputes. Commercial Properties: –Properties following certain specific municipality guidelines are designated as commercial properties. These properties are generally used by enterprises for commercial purposes other than residing. Commercial properties are also in high demand as collateral as they are of huge financial value, and lenders easily accept them as a security against any secured loan. For a commercial property to be eligible for a secured loan, you must check that no residential property falls in its vicinity as per the local municipal guidelines. Properties having more than one owner: –There is a lot of confusion regarding the eligibility of properties with multiple owners for a secured loan. A property having multiple owners can also be pledged as collateral against any secured loan, but only with a basic condition that the said property's ownership must be shared among the close family members, and there should not be any live ownership disputes. The relations preferred in this case are parents and children, siblings, mother-son, etc. Relationships like in-laws, friends, and other parties can also be considered based on the lender's guidelines. [B-02] To Summarize: If you are interested in collateral loans for housing finance or secured business loans for your start-ups, you can refer to various online portals. The most preferred one currently is Piramal Finance.
Marginal Cost of Fund Based Lending Rate As a home loan borrower, you may wish to get the lowest possible loan interest rates. Paying a high-value home loan is often heavy on the pocket, that too for a long time. Fortunately, a few years back in April 2016, the Reserve Bank of India brought forward certain guidelines under which the housing loan borrowers could benefit from cuts in the interest rates. These guidelines are called MCLR, Marginal Cost of Fund Based Lending Rate. Understanding MCLR In simple words, Marginal Cost of Fund Based Lending Rate, is a home loan offered by banks, lenders, finance companies, but at lowest interest rates. The main aim of this scheme is to ensure that banks can pass on the benefits of cutting the loan rates. It was in 2010, that the base rate system was introduced by the RBI in the year 2010 as a replacement for the Prime Lending rate system. The base rate was the minimum interest rate that was fixed by banks. Below the set benchmark money could not be lent. However, RBI felt that the transmission of interest rates in this system was not very operative and the benefits did not reach the customer. Hence, to bring some positive transformation in the process, in April 2016 the MCLR system was brought about. MCLR in Home Loans MCLR is connected to the repo rate as well as the lender’s fund cost. And whenever there is a change in the repo rate, it would directly affect the floating interest rate on the home loans in India. Therefore, when the lender cuts down the MCLR, there would be a decrease in the floating rate of interest on the home loan. What should be kept in mind is that the decreased rate and MCLR would not affect the EMI that you are to pay, but it would surely have an effect on the tenure of the loan. Calculating MCLR For calculating MCLR the following components are to be kept in mind: Marginal cost of fund Operating expenses Tenure premium Cost of maintaining CRR, Cash Reserve Ratio It is also vital to consider the sources that lend funds to the banks. Most banks generally borrow from savings accounts, current accounts, recurring and fixed deposits etc. to calculate the marginal cost of borrowing, the borrower may refer to the interest rate of the corresponding sources. As per RBI, the following formula can be used to calculate MCLR,MCLR = Marginal borrowing cost x 92% + return on the net worth x 8% Keeping the following points in mind will help in comprehending the different aspects of Marginal Cost of Fund Based Lending Rate, MCLR: Under the guidelines of the RBI, banks must maintain a minimum CRR, cash reserve ratio, of 4%. These deposits do not fetch any interest to the banks Banks can also obtain a certain allowance called Negative Carry on the CRR Banks need to manage the operating costs The own-expenses of the banks such as employees’ salary, cost of raising funds, cost of running the branch office, opening a new branch etc. cannot be billed to the bank customer MCLR housing loans depend on: Tenor premium Marginal costs of funds Bank operating costs Negative carry on CRR [B-02] Summing Up As per financial experts, Marginal Cost of Fund Based Lending Rate, MCLR is a much better option when it comes to interest rate calculations. Every time there is a change in the REPO rate, the consumer can expect a benefit. Thus, giving the home loan borrower a respite in the form of reduced interest rates. However, it should be kept in mind that only the borrowers who have a housing loan on floating rates would be able to avail of this benefit. The fixed rates on home loans in India are not affected by MCLR.
Energy-efficient home design is no longer a trendy concept; considering environmental factors, it has become the new normal. If you are planning to take a home loan or home renovation loan to build or renovate your home, you must consider Energy-efficient Home Design Methods, which have been described in great detail in the following parts of this article. Energy Efficiency – What is it all about? Energy Efficiency refers to the various methods undertaken to save energy and to improve energy productivity, ultimately saving money. Energy-efficient homes are more comfortable to reside in and are more durable in the long term. Are you excited about saving money & energy? Follow the given energy-efficient Home Design Tips for Renovation. 1. Enhanced Building Insulation Insulations seem like a less advanced solution, but they are the most effective when it comes to energy savings. Appropriate insulation lining should be provided, suitable for summers and winters. A good insulation lining helps regulate the temperature of the home, reducing the power consumption of air conditioners in summer and room heaters in winter. 2. Energy-efficient devices-HVAC Systems When renovating, check all your electrical devices for their energy efficiency ratings. If any device is outdated, replace it with efficient devices based on the latest technology, as these devices consume less electricity and emit very little heat. Heating, Ventilation, and Air Conditioning (HVAC) systems form nearly 50% of energy consumption in residential apartments. So, installing an HVAC system with high efficiency would save you energy demand, reducing your monthly electricity bills. 3. Smart Lighting Fixtures Lighting fixtures form a major share of energy consumption. During the renovation, replace all the old incandescent light bulbs with Compact Fluorescent Lamps (CFL) or Light-Emitting Diodes(LEDs) as they have high energy efficiency, longevity, and low heat radiation features. These days, smart lighting fixtures are available that work on sensors and sense the presence of the humans in their proximity, which means they light up when you enter the room and automatically go off when you exit the place. These smart lighting fixtures can be installed on the terrace and at other appropriate places to save energy. 4. Captivating advantages of Solar Power As solar light is abundantly available, you can install solar panels on your rooftop to intercept the solar energy. Rooftop solar systems provide an alternative energy source that is eco-friendly and does not emit any greenhouse gases. It’s just a one-time investment with very minimum maintenance cost but, in return, gives you continuous savings on your energy bills. If you have taken a home loan and are planning to rebuild your house, keep the orientation north-facing so that sunlight enters the house for the maximum amount of time, reducing energy requirements in the daytime. 5. Upgrade Water systems in your home Water requirements are one of the most crucial requirements in your home. While planning renovation activities, strategic planning should be done to upgrade the existing water system. Rooftop rainwater harvesting systems or used water recycling systems can be installed to use water for irrigation and secondary uses. Existing hot water systems should be replaced with efficient heating systems based on new technology or rooftop water heating systems. The point to be noted here is that this saves the cost of excess water supply and a portion of your electricity expenses that could have been used to draw that excess water. Building your dream home demands significant cash flow. You can look forward to available loan options for your finance requirements. You can refer to Piramal Finance (PCHF), which provides dedicated services for housing loans, Home Construction Loans, and Home Renovation Loans. [B-02] In conclusion Energy-efficient practices should be incorporated into daily habits so that energy can be conserved not only for economic gains but also to protect nature and reduce pollution. Some basic steps that can be taken in this regard are checking for sanitary fitting leakages, switching electrical appliances off when not in use, and installing dual-flush toilet systems to conserve water.
Now that you have taken a home loan, chances are that you could be worried about the home loan EMI. After all, taking a home loan plan is not enough. Besides having the financial commitment to make regular EMI payments, you must also have a suitable financial plan to repay your home loan as soon as possible. To help you decide on a fast home loan repayment, here are the best home loan tips: 1. Increase your down payment: The first of the home loan tips is to make a higher down payment. This will lessen the total dues or the overall loan amount. A reduced home loan EMI payment can mean faster repayments. Experts often suggest making a downpayment between 20% and 30% of the total loan amount. 2. Select a home loan plan with lower interest rates: Before you select the best home loan plan, always try to find a lender with a low interest rate. This will ensure that the financial burden of your home loan EMI is considerably reduced. If you have already taken a home loan plan with a higher interest rate, consider changing it or refinancing it through the balance transfer option with a low-interest home loan provider. 3. Opt to pay higher EMIs: Want to repay a home loan quickly? Select to pay higher EMIs. However, paying a higher loan EMI might not sound like the best idea in the short term. Market experts often suggest this as among the best home loan tips to reduce your debt burden swiftly. Of course, you are paying more now, but doesn’t this mean your debt burden is getting reduced faster? 4. Select to pay shorter loan tenures: This is also among the basic home loan tips to ensure you pay the EMI immediately. By selecting a shorter tenure, you can quickly reduce your debt burden. Remember, a shorter tenure reduces your financial obligation by reducing the overall interest rate. Once you finish your home loan EMI payments speedily, you can also take a fresh loan for any other requirement. Repaying your home loan faster will also enhance your credit score. 5. Think seriously about making part prepayment of your home loan: A home loan plan always allows you to make a part prepayment. If you have not given much thought to this aspect of a home loan, you should do it immediately. Suppose you have taken a home loan plan and choose to make a part prepayment; it will mean that your overall outstanding home loan amount will decrease. This, in turn, means reduced home loan EMIs. Now that your home loan EMI has decreased, won’t you be able to pay them faster? No wonder that market experts say that making part prepayments is among the best home loan tips. 6. Never miss your home loan EMI payments: Once you get a home loan plan, you should never default on your EMI payments. This will adversely affect your credit score and result in the imposition of penalties and fines. Sticking to the regular payment schedule is among the best home loan tips for becoming debt-free quickly. 7. Use your right to get tax exemptions promptly: Did you know that a home loan plan also allows you to receive tax exemptions? Yes, you heard that right. Depending upon your eligibility, you can get exemptions under Sections 80C, 24(b) and 80EE of the Income Tax Act. Consult a tax advisor or carefully review the exemptions and refunds sections in the Income Tax Act. And once you get a refund, use the amount wisely. This will ensure that you can repay home loans quickly and hassle-free. 8. Rent your house: The last among the home loan tips is to rent out a part of your purchased or built house/flat. This would mean a steady and regular income to meet your home loan EMI obligations. [B-02] The Bottom Line Keeping informed about tips to repay the home loan faster can make the crucial difference between financial well-being and a financial crisis. If you have taken a home loan plan, pay attention to each and every aspect of your home loan, including your home loan EMIs.
A Home loan balance transfer refers to the transfer of your current home loan from one bank/lender to another to lower your EMI by availing a lower interest rate and other benefits offered by them. Higher interest rates impact finances directly and can deter your monetary growth. In such circumstances, opting for a Home Loan balance transfer can help save a lot of money. With the recent dip in interest rates, the home loan interest rates have dropped to an all-time low. Are you still paying home loan EMI on the previous rate? It’s time you should consider a home loan balance transfer. Requirements for Balance Transfer A few things that you need to ensure before proceeding with a balance transfer are: Your remaining repayment period exceeds five years. Check if you have any prepayment penalties to pay. According to RBI guidelines, banks should not levy fines for loan foreclosure. You have no history of defaults on EMI payments with the existing loan and have a good credit rating. You have all the documents related to the property ready. The Balance Transfer Process – How it Works? You may consider a home loan balance transfer to a bank or other lender offering a lower interest rate if you’re currently paying a higher interest rate. The Process Steps: For the transfer process initiation, you need to go through the documentation process as described below: Apply to the existing bank requesting a transfer of the balance loan amount. Apply to the bank/lender you have chosen to transfer your balance loan. Once the new bank/ lender approves your application, the outstanding balance will be paid to your existing bank in full. On receiving the outstanding amount, the existing bank will hand over the property documents and issue a clearance certificate to you. You now need to submit all these documents to the new bank. Finally, the outstanding loan amount of your existing home loan has been transferred to the new bank/ lender, and you will henceforth pay the EMIs to the new bank. The home loan transfer process is now complete. The Benefits of Home Loan Balance Transfer There are numerous benefits associated with a home loan balance transfer, as listed below: Reduction in the Interest Rate & EMI: The main reason for opting for a home loan balance transfer is the reduction in the interest rate. It also helps to reduce your EMI, which can save you a good amount of money. Better Loan Terms: Banks/lenders usually vary with the terms that they offer for the loan provided. Sometimes, it so happens that you might have settled for a home loan in a hurry with terms not suitable to you; in such a scenario, you can consider a transfer with lenders offering better terms. Foreclosure and Prepayment Charges: Foreclosure and prepayment charges are the two important charges associated with home loans that lenders often charge you. Although RBI in 2012 lifted foreclosure charges on home loans that are on the floating interest rate, charges apply to home loans at a fixed interest rate. But you can consider a transfer if you have taken a loan at a floating interest rate. All these factors must be considered during the cost-benefit analysis before a home loan balance transfer. Top-up loan: An added benefit is the top-up loan facility. When opting for a balance transfer, you are entitled to an additional amount as a top-up amount in addition to your outstanding amount. [B-02] Key Points Most lenders nowadays offer a home loan balance transfer, and they try to lure customers with various attractive offers and interest rates. Read the terms and conditions of the new bank properly to avoid any hidden expenses. You should also be very cautious, consider all pros and cons, and conduct a cost-benefit analysis before proceeding. Visit our site to apply for the balance transfer from your existing loan to one with Piramal Finance.