Home Loan Balance Transfer
Owning a home is easy but repaying the loan to buy the home is one hard commitment which requires patience and a big chunk from your income every month. Over a while, a home loan can become like a burden because of the high-interest rate one has to pay. A home loan balance transfer is the solution to reduce your monthly EMIs by shifting the outstanding loan home from the current lender to another lender offering a lower rate of interest.
Also known as Refinancing, a home loan balance transfer is an excellent option when it comes to availing the benefits of the low-interest rate provided by another lender. If you opt for a home loan balance transfer, then this means that you are shifting your outstanding home loan with your present borrower to the different borrower offering a lower interest rate. This is a great way of saving on some money which would otherwise have gone as an interest to the lender.
Key Features of Home Loan Balance Transfer
- It encompasses transferring of the outstanding balance of your current home loan from your existing lender to another lender.
- Banks usually charge a fee equivalent to 0.5% of the loan transferred. This fee is paid by the borrower to the new lender.
- Home loan balance transfer application is given the same importance as the home loan application.
- One can avail the home loan balance transfer only after a pre-determined time which is stated on the loan agreement ( usually after 6months ).
- Post the home loan balance transfer, the borrower is subject to repay the transferred loan amount along with the interest rate which will be charged thereon.
Reason to apply for a Home Loan Balance Transfer:
In the home loan balance transfer, the shift is primarily done from a high rate of interest to a low rate of interest. The main aim of doing it is to save on some money. The switch must be done with careful calculations so that your monthly EMI and the interest rate gets reduced and you save some money. Some key reasons to make the switch are:
- Minimising the burden of monthly EMIs
- Minimising the amount paid as interest
- Getting benefits of discounts and offers from a different lender.
Home Loan Balance Transfer - Eligibility Criteria
A home loan balance transfer can be applied by any salaried, self-employed professional/ businessman who has a home loan which is being repaid timely. Eligibility criteria differ from one lender to another, but some basic criteria include:
- The applicant must be an Indian between the age of 21 to 60 years. Self-employed individuals can avail the home loan balance transfer up to 65 years.
- You should have a steady income proof to justify your repayment capacity.
- Salaried individuals must be working in their current organisation for a few numbers of years. And for self-employed individuals, their business should be operational for two years.
- During the balance transfer application process, your credit rating shouldn’t go down. Chances of your home loan balance transfer application getting rejected are high in case of your credit rating going down.
Documents Required Home Loan Balance Transfer
Lenders treat the home loan balance transfer application similar to the home loan application. The new lender seeks all the requisite documents which are required during the fresh home loan application. The new lender revalidates these documents. One must keep their home loan documents handy to get their application approved quickly.
Documents required for refinancing are:
- Passport-size photographs
- Latest three months' Salary Slips in case of Salaried Individuals.
- For self-employed applicants, documents proving the existence of your business and financial statements are required for last 2 years.
- Six months' bank statement
- Identity Proof: One can give any of these documents as the identity proof- Pan Card, Passport, Driving License or Voter's ID card
- Address Proof
- Age Proof: One can give any of these documents like age proof- 10th or 12th Marks Cards, PAN Card or Voters ID Card.
- Bank statements from where the home loan EMIs were deducted since the last 12 months of the account.
- Loan statement copy and complete set of documents relating to the property against which home loan was taken.
Guiding Steps to Home loan Balance Transfer:
Home loan balance transfer requires one to follow the steps as mentioned below:
Step 1: Analyze cost benefits being offered
A home loan balance transfer is done to reduce the interest burden. But one should carefully study the present situation and check the viability of refinancing before making the final plunge. Here are some key pointers which must be analysed while thinking of home loan balance transfer:
- In case of a fixed rate of interest on the home loan, pre-payment charges will be levied on by the lender to transfer the loan. No charges are levied if the rate of interest on a home loan is floating. Thus, transferring is beneficial if the existing home loan has a floating interest rate.
- Balance transfer with long tenure is a great option as it means lower monthly EMIs and higher benefits.
- Ask your bank about all the hidden charges to avoid paying more in the end.
Step 2: Get NOC from the existing bank
The next step is to get a No Objection Certificate (NOC) from the existing home loan provider.
Also, ask for a foreclosure letter and all the documents in custody of the bank along with the payment history.
Chances are that your existing bank offers to negotiate with a reduced interest rate. Don’t make a hasty decision and take a calculated and informed decision about the transfer. LoansJagat’s professionals help you arrange all the documentation on your behalf from your existing bank.
Step 3: Apply To New Bank
Once all your documents are in your custody, apply for a home loan balance transfer with another lender. The bank will validate all your documents and check for your repayment capacity and income. While choosing the new bank, it is advisable to compare different lenders on their offerings. LoansJagat is an excellent platform which lets you compare different lenders based on the rate of interest, loan tenure, charges, EMI, loan amount etc. You can choose the lender which best suits your needs and requirements.
Step 4: Credit Approval
The bank will check your credit history, eligibility and evaluate your application before approving your credit request. All the documents submitted will be validated and vetted by the bank. Once the bank is sorted on these aspects, it will provide you with details about the new loan rate of interest, loan tenure, EMI etc.
Step 5: Finalisation with Chosen Loan Provider
The new lender will finalise the home loan balance transfer process and clear your outstanding loan dues with your previous home loan lender at ease.
What precautions must be taken when transferring a home loan?
- Check and analyze the offerings of the new lender: Don’t just make the switch without analysing the genuineness of the new lender. As a borrower, you are also entitled to check the authenticity and track record of the lender before associating yourself with it. Be fully sure about the lender as it is going to be a commitment for years.
- Check the customer service quality of the new lender: You don’t want to experience poor customer service while making the switch. Lower rate of interest should not be associated with poor customer service.
- Estimate transaction costs: The transfer comes along with various charges like pre-payment charges, foreclosure charges, processing fees, documentation and stamp duty charges. It is advisable to calculate the entire switching cost so that you don’t end up paying more than what you would have paid before the switch.
A home loan balance transfer is a great way of saving on some money which would otherwise have gone as interest. It is advisable to check all the pros and cons and calculate the cost of the switch before finally doing it. This will give you an estimate whether the switch will be beneficial or not. Try to negotiate with your bank for a better deal as it will save you on prepayment charges and documentation charges. Choose the new lender carefully by keeping in mind the long term relationship which you will have with the bank.