A home loan balance transfer facility lets you switch your existing home loan to a new lender with favourable terms and conditions. Let’s say you are paying an interest rate of 11% p.a. on your home loan to your existing lender. You could transfer your home loan to another lender offering lower interest rates, say 8% p.a. (provided the lender offers a home loan balance transfer). This would not only help you save money on the interest payable but also pre-closing your loan.
Learn how home loan balance transfer works, its benefits and features, documents required, fees and charges, EMI calculation and more. Read on!
The major benefits of a home loan balance transfer are as follows:
Here are two reasons why one can consider opting for a balance transfer facility:
Ideally, a borrower should opt for a housing loan balance transfer facility after paying EMIs of an existing loan for 12-18 months.
Here is the step-by-step process that you can follow to refinance your existing home loan:
Step 1: Visit the online portal of your preferred lender.
Step 2: Go through the terms and conditions and also check the interest rate and processing fee.
Step 3: In case you decide to go ahead with the home loan transfer after taking the necessary factors into consideration, fill up the application form for the balance transfer and submit it. Make sure to provide accurate details, such as the property type, lender’s name, etc.
Step 4: Submit all the necessary documents required for home loan transfer along with the application form. Moreover, acquire the consent letter from the existing financial institution and submit it as well.
Step 5: Next, you will be able to check the loan offer along with the required fees you need to pay for processing.
Step 6: Once that is paid, you can wait for a few days to get the documents verified and your application approved. After that, your new lender will pay off the balance due to that existing financial institution.
Once the amount is repaid completely, your account will be closed, and the property documents will be handed over to you.
Since the idea is to make substantial savings on your EMI payments, it is necessary to evaluate the new monthly instalment amount before applying. The amount you can save is dependent on the following factors:
You can use the home loan balance transfer calculator to understand the difference in EMIs. Make sure to choose the lender after making these evaluations as the rate of interest varies across different lenders.
Before applying, apart from arranging the necessary documents, you need to meet the eligibility parameters too. Find the requirements below:
Note that it inevitably becomes easier for eligible applicants to get instant approval with Navi as well as attractive interest rates while refinancing the home loan. The interest rate starts from 7.39% p.a.
Here is a list of documents one must submit to refinance a home loan:
Apart from these primary document requirements, some lenders can also ask for additional home loan transfer documents, such as post-dated cheques, loan agreement papers, etc.
In addition to the rate of interest, there are other kinds of charges and expenses involved when you transfer your home loan balance. There are two major fees that home borrowers should look out for while opting for a home loan balance transfer:
Processing fee- This is the fee which the borrower has to pay to the new lender for approving and transferring the home loan from the previous lender. Moreover, the processing fee tends to be 6% of the home loan amount
Foreclosure charges- Borrowers need to pay a certain amount of money to the previous lender for closing the loan account. These charges are not applicable for floating home loan rates. However, in the case of fixed-rate home loans, the charges rise up to 4% of the outstanding principal.
As a new borrower, it might seem confusing to differentiate between a home loan and a home loan balance transfer. To help you understand it better, here are some details:
This is a secured credit facility that allows individuals to obtain substantial funds for purchasing a house or land and for any property construction. Certain documents are required to be submitted for getting the loan application approved.
Home loan balance transfer
This is the process of refinancing your existing home loan with another lender that is offering a lower interest rate. Note that there is lesser documentation involved as your eligibility was already assessed before.
Some important things one should consider before opting for a home loan balance transfer are as follows:
Opting for a home loan balance transfer helps reduce the interest rate and loan burden on the borrower significantly. Home loan refinancing is a suitable option for making substantial savings on interest costs. That said, keep in mind that it is not wise to opt for this facility if you are approaching the end of your existing loan and just have a few EMIs left. Also, before opting for a home loan balance transfer read the terms and conditions carefully, and calculate the EMIs and other charges. For hassle-free home loan balance transfer, download the Navi app now!
Ans: No, you are switching your lender to benefit from the reduced interest rate, which automatically makes your EMIs affordable. This way, it becomes much easier to handle the monthly liabilities, ensuring your credit score remains unaffected.
Ans: The time taken for refinancing a home loan varies from one home loan provider to another. From collecting the NOC from the existing lender to arranging supportive documents, this procedure involves quite a few steps.
Ans: No, there is no such rule that states you cannot transfer more than a certain amount. It entirely depends on the outstanding amount you have with your existing lender. You can transfer the entire amount using this facility.
Ans: No, the home loan balance transfer process does not require a guarantor. If you decide to refinance your home loan, your chosen lender will assess your eligibility before sending the approval. Other than that, no other requirements are there from a lender’s end.
Ans: Yes, while transferring your home loan, another key advantage that you can get is the top-up loan facility. Using this high-value top-up loan obtained while transferring a home loan, you can meet any urgent financial requirement.
Ans: If you transfer your home loan balance it will not have any effect on your credit score. In order to maintain your credit score, you need to continuously pay your EMIs on time. Moreover, you can opt for higher EMI and smaller tenure when you transfer your balance to a new lender. This way you can increase your credit score as well.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.