A home loan is a sizable loan and long-term liability for the borrower. Therefore, it is crucial to make a research-based decision before taking a home loan. Though most individuals perform thorough research before finalising a home loan, there are still chances that it is not the best in the industry. Or, the lender may increase the home loan interest rates due to a change in the Reserve Bank of India (RBI) policy rates. One can consider a home loan transfer to reduce the loan cost. The home loan balance transfer process is easy and can provide a new home loan at better terms.
How the Home Loan Balance Transfer Works?
- A home loan balance transfer is the process of moving an existing home loan to a new lender. The new lender treats it as a new home loan application. In this process, the total outstanding home loan amount is paid to the current lender, and the new lending institution sanctions a new home loan, generally at a lower interest rate.
- Lenders may allow the customers to opt for loan tenures longer than the remaining tenure of the home loan.
- Customers can benefit from a top-up loan facility with a home loan balance transfer. When a borrower urgently requires additional funds with their home loan obligations, getting another loan, like a personal loan, may be challenging. The borrower can request the new lender to sanction a top-up loan providing additional funds with a home loan balance transfer. A top-up home loan allows individuals to use the funds per their financial needs without an end-use limit.
Charges to Process Loan Balance Transfer
Lending institutions charge a nominal fee for their loan balance transfer services. Primarily, it includes foreclosure fees and processing fees.
- Foreclosure Fee: This fee is paid to the existing lender as the borrower closes the loan account before completing the loan tenure. However, this fee can be zero with many lenders.
- Processing Fee: The new lender may levy the processing fee as the loan balance transfer results in the new home loan application.
The primary aim behind transferring the home loan balance amount towards a new home loan is to reduce the loan EMI (Equated Monthly Instalment). Therefore, one should look at the charges levied on the home loan balance transfer process before choosing a new lender.
Home Loan Balance Transfer Calculations
Using a home loan balance transfer calculator, customers can get a snapshot of the merits of a home loan balance transfer, including reduced EMIs, and savings. Users can access the calculator at the lender’s official website.
The process to use the calculator is as follows:
- Refer to the home loan balance transfer calculator under the Home Loans tab.
- Enter the details – loan amount needed, preferred tenure, and the interest rate.
- They will have the loan EMI amount and savings with the bank’s refinancing option.
If customers want, they can connect to the lender’s representative to know the fee it charges for the home loan balance transfer facility and calculate charges and savings.
The Process of Home Loan Balance Transfer
Once a borrower gets a better home loan deal with more favourable terms than the current lender, they can start the home loan balance transfer process. The following are the steps involved in the home loan balance transfer process:
- A borrower should check the eligibility with the new lender to know ‘how much home loan can I get‘.
- Get the NOC (No Objection Certificate), foreclosure letter, statement for loan repayment and property documents from the existing lender.
- Initiate the online application process at the new lender’s official website. Provide personal, financial, income, and existing property details.
- Check the home transfer loan offered by the lender. It is best to apply for the amount one needs instead of the amount the lender offers.
- Upload the copies of the required documents as per the borrower’s category (salaried or self-employed) – ID proof, address proof, income proof, and signature proof,
Thus, one needs to shop around and weigh the cost benefits of the home loan transfer facility with different lenders. Compare home loan interest rates, benefits, and charges to get the benefits of the best balance transfer offer.