Balance Transfer of Home Loan is a process of transferring existing home loan into another bank or NBFC. This facility is taken mostly if the borrower finds lower interest rates and better services at different banks. On the basis of a good repayment track record, you can also discuss and renegotiate with your current lender for better interest rates.
Many home loan borrowers are unhappy with the high-interest rates they are being forced to pay. But when your existing lender starts discriminating between you and its new customers, it is the right time for you to transfer your home loan to a lower interest rate prevalent in the market and save money. Balance transfer option is opted by most people as it will lower the EMIs and saves a lot of interest that can be utilized on other essential things.
When should you go for Balance Transfer?
If you think you are paying a high-interest rate on a home loan with the existing bank then it’s time to think of alternatives that are available. This is exactly when home loan balance transfer option comes to your rescue if there are other banks that can offer loans at lower interest rates with several benefits.
Avail a home loan balance transfer if:
- Other banks offer a low-interest rate.
- When you try to talk with your bank to reduce the rate of interest on your loan, by considering the good repayment history and a generally pleasant relationship between both.
- A good and decent track record of about 12 months to 18 months flawless loan re-payments on the existing home loan.
- Any remaining payments will be made to a new bank to which the balance is transferred.
- Transfer the existing home-loan at a rate of interest that is less than the original loan.
- Top up on an existing loan in order to get ready funds for any requirements.
- The process of obtaining a home loan is now stress-free and the amount due for the installments is calculated on an individual basis.
Eligibility Criteria for Home Loan Balance Transfer:
The eligibility of the borrower to repay the loan depends on their financial conditions. A borrower who has a paid at least 12 EMIs and has a good credit score can get balance transfer offers from other housing finance companies. The lending institution may also prescribe the minimum loan amount eligible for balance transfer. The following factors play a crucial role with regard to the same:
The probability of borrower continuing in the same occupation
Annual or Monthly income
Source of income
Savings and credit history
Number of dependents
Home loan transfer can be applied by any one person or jointly. The co-applicants need not necessarily be the co-owners of property, it is quite optional and at the borrower’s discretion.
Documents Required for Home Loan Balance Transfer:
Documents such as a photograph, Educational qualifications proofs, bank statements, Age proof along with address proof, Signature Proof and Identity proof, Income proof plus banking details need to be provided. In addition, the following documents will be required:
Photocopy of documents of the property.
Latest outstanding balance letter from the lending Bank.
A letter on the letterhead of the existing bank stating the list of property documents held by them.
Capacity to repay the loan takes factors such as age, income, qualifications, savings history, number of dependents, assets, liabilities, stability in job is consideration. In Floating-rate of interest loans, any change in the base rate will be having a direct effect on the interest rate of the Home Loan.
The Benefits of Balance Transfer:
Unless a home loan balance transfer is really reliable and useful nobody wants to take the risk of transferring the loan to a different bank. Some of the advantages of home loan balance transfer are:
- Lower interest rates: As there is security provided for the loan in the form of mortgage, the risk for the Bank is low, due to this reason the interest rate on a mortgage loan is very low.
- Hassle free and minimum documentation involved: Balance transfer of home loan is not a difficult and time-consuming task; this can be easily done with the help of less documentation.
- Prepayment facility available: Many people want to know whether the pre-payment facility will be available in case of balance transfer or not. The answer is yes, even if you did a balance transfer of your home loan, it can be pre-closed at your discretion.
- The top-up value offered will be higher than what is offered from home loan bank. The loan repayment will be quicker with lesser amounts towards interest; this will help in getting a huge amount of loan for top-up requirements.
- Protect CIBIL Score: There is no need of CIBIL requirements for a balance transfer. This will help you to have the CIBIL scoring unharmed.
- Interest saving apply to your current EMI, outstanding principal amount, existing rate of interest charged by your lender.
- Many Options: There are a lot of options available to opt the best lenders that offer good facilities.
- A decrement in monthly EMI payment up to 5%, depending on the bank you opt to transfer home loan.
- No additional charges: Only a few lenders charge the processing fee on home loan balance transfer plus no additional cost will be involved in the transfer.
Owning a house is more like a dream come true for many of us. So let us not take the risk of unplanned and uncertain event striking us. One should always check the timing of loan switch to a new bank, always try to switch the loan in the early tenure of the loan, Always study processing fees & other charges, Check the Teaser loan Terms and Conditions, Take Documents in Time from your current lender. Consider overall costs involved before taking the decision to do a balance transfer. According to RBI rules, no foreclosure charges shall be levied on floating interest rate loan to individuals by the earlier housing finance institution.