Immovable Properties or Homes are big investments and it is not within reach of the common man to pay the entire bill on his own. Loans and other associated benefits come like a savior. But with this, it brings the complexities of interest rates and making the right decision. Housing Loan involves a large amount of money and therefore, an interest rate is a matter of concern for an individual. Home Loan Balance Transfer is a process when a borrower transfers its existing home loan into another bank or any Non-Banking Financial Corporations for lower interest rates and better services. Borrower chooses this facility as it helps to lower down the overall monthly installments by paying a lower repayment amount, eventually helping in saving a lot. Generally, a home loan interest rate may begin from 8.30 % and can go up to 12% or higher in some cases.
The interest rate of an existing home loan and the flexibility the other bank offers determines whether one continues with the same or think of a switch. For lower interest rates and better services, a customer can transfer the outstanding balance to another bank. The new lender or financial institution pays the old lender the outstanding principal amount due. There is no doubt that a home loan balance transfer would definitely reduce the EMI payment as finding the best one that suits your requirement is essential. In order to opt for this, all you need to do is just to fill the housing loan balance transfer application form keeping in mind the calculated savings.
Benefits of Home Loan Balance Transfer
While housing loan balance transfer the most important benefit a borrower can avail is that you can save money “a lot”. The actual difference in the interest rates between the two lenders, tenure of the loan and outstanding amount are the three primary contributing factors in home loan balance transfer.
Reduction in monthly EMIs payment depending on the lender you choose to transfer housing loan.
When you require an additional fund for reasons like business expansion or any other financial need, you can directly approach your lender for a top-up loan. If your old lender denies a top-up loan or the sanctioned amount, you can consider transferring the loan. In addition to this, some lenders also offer a higher top-up value in comparison to the existing one. Hence, the repayment process will be faster.
The process of housing loan balance transfer involves less paper-work, and hence shifting your home loan from one lender to another is not time-consuming. This can be easily done with the minimum documentation.
Eligibility Criteria for Home Loan Balance Transfer
An applicant must be a salaried or self-employed businessman, an Indian citizen with a minimum age of 21 years to a maximum of 60 years old.
An applicant credit rating is really important, and it should not fall while transferring house loan balance transfer.
A borrower can opt for housing loan balance transfer if one has an outstanding home loan in the existing bank. The basic eligibility criteria are borrowers’ income, age, employment history and loan to value ratio. The other important criteria for refinancing home loan are:
An applicant must have an existing home loan from another lender. Some Lenders may require that an applicant or borrower should have paid some EMIs, initial like 6 to 12 EMIs on its existing home loan before choosing for housing loan balance transfer.
An applicant should not be under any type of default in the payment of EMI on its existing loans.
If it is an under construction property, the project must be approved with the new lender but one makes sure that while home loan balance transfer on the new property, the registration part should have been completed otherwise it may not be possible.
Documents Required For Home Loan Balance Transfer
Both the banks, i.e. existing and the new will ask for certain documents that need to be submitted for a complete housing loan balance transfer. Documents such as the photograph, bank statements, photocopies of your address proof and identity, income documents need to be provided. In addition to all this, a borrower is required to submit a letterhead from the existing lending institution stating the list of property documents held by them, and the total outstanding amount due.
Home Loan Balance Transfer Process
A housing loan balance transfer is very much similar to availing a new home loan which includes all the interim steps such as document verification, field investigation, legal and technical evaluation of the property. But along with all the process, you will be required to submit a NOC i.e. no objection certificate from the existing loan provider. A borrower should also remember to collect all the original documents from the existing lender and submit to the new home loan provider.
Pre-payment Charges: While housing loan balance transfer one should check the pre-payment charges. If your housing loan agreement has a pre-payment clause and if a lender is charging a sizeable amount, this may lead to a negligible saving.
Processing fees: Generally, charges applicable for a new home loan are also applicable to housing loan balance transfer case like processing fee, legal charges, etc. Ensure that there are no other hidden charges stated in the schedule of charges while transferring home loan balance transfer.