Which has More Benefits? Home Loan Balance Transfer or Home Loan Top Up?

When you avail a home loan, it doesn’t only act as the primary financial support to buy your home. There are many added advantages that can be availed by an existing home loan borrower. The best part of taking a home loan is that it makes you own a property without putting much financial pressure.

A Home loan is the best example of a good credit. The benefits of home loans are many in numbers. A home loan makes you a proud property owner once the loan repayment is done in full. Moreover, the capital appreciation is certain to make your own much more than what you have invested in the last few years.



A home loan generally runs for decades and during that period a home loan borrower is eligible for availing a number of benefits from the existing home loan. In this article, we are going to touch two different advantages of having a home loan. One of these two factors will help you to reduce the loan cost while the other one will help you to fulfill the extra fun requirement at any time. The two terms that we are going to study in this article are Home Loan Balance Transfer and Home Loan Top Up.

Home Loan Balance Transfer

A home loan balance transfer is a process which makes your outstanding home loan balance transfer to another financial institution. A balance transfer of a loan makes you continue the loan but with a new lender. Most of the times, a balance transfer of home can give you the benefit of low-interest rate.

Most of the loans at present day are taken at a floating interest rate. Whenever there is a hike in MCLR, the interest rate which you were paying is certain to get affected by the same. In such scenarios, a balance transfer can act as the only shield against the rate surge.



Any business wants to have good customers on board and banks are not an exception. If you are disciplined with your EMIs and own an excellent credit history, every financial institution will welcome you as their valued customer. One can take an advantage of such a situation and make a negotiation on the rate of interest. Needless to mention that lenders offer a much competitive interest rate for those borrowers who are early in their loan tenure and have an excellent repayment history.

A reduced interest rate minimises the amount that you were paying in monthly installments. You may save a little money in each EMI but if you add it up you would be surprised to see what a great amount you have saved in total loan cost.

A home loan top-up is a much more pocket-friendly way of getting an emergency fund than a personal loan.
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A home loan top-up is a much more pocket-friendly way of getting an emergency fund than a personal loan.
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A home loan top-up is a much more pocket-friendly way of getting an emergency fund than a personal loan.

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A home loan top-up is a much more pocket-friendly way of getting an emergency fund than a personal loan.
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Home Loan Top-up

A top-up home loan is an excellent alternative to a personal loan. Most of the time whenever we are in need of money for our personal use, we opt for a personal loan. A personal loan is not the only way to avail multi-purpose fund. There are options which are better, cheaper and faster than personal loans. A home loan top-up is one of those options.

One can avail a top up on his/her existing home loan. A home loan top up is a multipurpose loan. This open-ended loan can be used for any personal use of borrowers such as home furnishing, marriage expenses, taking a vacation, purchasing home appliances and many more.

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A home loan top-up is a much more pocket-friendly way of getting an emergency fund than a personal loan. A personal loan interest rate at present-day starts at 11.99% whereas one can avail a home loan top up at 1% more than the home loan interest rate. A home loan top up is much cheaper than a personal loan.

Though a personal loan online is renowned for being faster in processing and disbursal, actually if you avail a home loan top up it would be faster. The reason which makes a top-up loan faster is that the lender already has all your documents. So a home loan top-up applicant need to submit the documents to the lender.  In a home loan top up, the process of document verification can simply be skipped. Availing a home loan top up instead of a personal loan is a much appreciable financial decision.

A home loan top-up is a much more pocket-friendly way of getting an emergency fund than a personal loan.
— Will Smith

The Bottom Line

A home loan is such a credit which comes at a minimal interest rate. Home loans come with many benefits while making your dream home affordable. A home loan can better be called as an investment as it makes you being the owner of a property after some time. A home loan saves much in tax payment, the home loan transfer process decreases the loan cost and a top-up home loan provides you emergency fund. The advantages of a home loan are always welcoming and beneficial for the borrower.

Credit

  • Has the borrower been late on a mortgage in the last 12 months?

    • If so, this is usually a deal killer. Ask for help.

  • Is the borrower’s credit score lower than 640?

    • If so, why - are they currently delinquent on accounts?

  • Are any of the borrower’s accounts currently in dispute?

    • If so, are they willing to get the dispute(s) removed (this will affect the credit score)?

  • Has the borrower had a bankruptcy or foreclosure?

    • If so, when? Does it fit the guideline timeframes?  

  • Does the borrower have unpaid collection(s)?

    • If so, can it be excluded or must it be paid? Ask for help.

  • Is there a non-occupying borrower and/or unmarried borrower on the loan?

    • If so, is the second person listed on separate/secondary tab and not the primary screen?

  • Has the borrower opened any new accounts that are not reflected on the current report?

    • If so, does the have borrower have documentation, & is it reflected on the excluded debt worksheet?

DTI

Is the borrower’s new housing payment significantly higher than what is currently being paid (payment shock)?

  • If yes, what are the compensating factors?

  • Does the borrower receive alimony/child support/adoption stipend?

    • If so, can we prove it has been paid for last 12 months & can we prove it will continue for 3 years?

  • Does the borrower pay alimony/child support?

    • If so, is it listed on credit report and/or correct sections on the application?

  • Does the borrower have deferred student loans?

    • If so, what are the projected payments & have they been counted in the liability section of application?

  • Are we excluding ANY debts?

    • If so, why? Have they been paid by another person for the past 12 months, & can this be documented?

  • Is the borrower an authorized user on a “bad” account?

    • If so, are we having the borrower removed from the account by the primary owner & obtaining a credit supplement?

  • Is the property going to be a primary residence?

    • If not, research the parameters for a secondary residence/investment property.

  • Does this loan fit the program-specific loan amount limits?

    • If not, what other programs are options?

Employment

  • Has the person been in the same line of work for 2 years?

    • If not, is there a commonality between jobs and/or schooling?

  • Has the borrower been a full-time student in the last 2 years?

    • If so, is it being included as employment on the application? Are transcripts available?

  • Does the borrower have a second job/overtime/commission income?

    • If so, has it been consistent for 2 full years AND is not declining?

  • Does the borrower have 2106 expenses on most recent tax returns (unreimbursed business expenses)?

    • If so, have the deductions been subtracted from borrower’s income?

  • Is the borrower self-employed?

    • If so, did we use the Income Analysis sheet & has a second person reviewed the calculations?

  • Is the borrower a US citizen?

    • If not, does the borrower have a permanent residence card (green card)?

Assets

  • Are 401K funds being used as down payment?

    • Do we have a copy of terms of withdrawal and proof of deposit?

  • Are 401K funds being used as reserves?

    • If so, are we counting only 60% of the vested value & do we have terms of withdrawal?

  • Are all gift funds being used for down payment?

    • If so, can they be sourced & is a gift letter being obtained?

  • Does borrower use a shared bank account?

    • If so, a full access to funds letter from the party not on the loan is required.

  • Is there real estate owned/retained that does not have a mortgage or escrow account?

    • If so, taxes & insurance on properties with no mortgage or no escrows must be represented on 1003.

  • Is current house (with escrowed mortgage) being retained?

    • If so, are we counting the mortgage payment value as negative rent?

  • Is the borrower obtaining subordinate financing (ex: Conventional 80/15/5)?

    • If so, do we have documentation from the other lender?

  • Does borrower have 2 months reserves?

    • If not, why, and/or is credit score high enough to compensate for lack of reserve funds?

  • Has borrower been living rent free?

    • If so, has borrower shown ability to save?

Contract

  • Will the borrower be putting down earnest money?

    • If so, advise they use personal check (not cashier’s check, money order, or funds from someone else).

  • Is the borrower asking for anything extra in the contract offer (ex: fence to be put up, carpet allowance, or personal property)?

    • If so, ask for help.

  • Are we adding or removing anyone from the original contract offer?

    • If so, we must have a fully executed addendum to remove or add someone to the contract.

  • Is the borrower requesting seller paids on contract offer?

    • If so, is the amount they want in line with program specific guidelines? Has it been included on the 1003?

  • Is the seller listed on contract an entity (rather than a person)?

    • If so, have you verified it is not a FHA flip situation?

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Vivek Dixit