Home»Blog»Home Loan»What Is Home Loan Balance Transfer And Why You Should Consider It
What Is Home Loan Balance Transfer And Why You Should Consider It
15 June 2022
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!
Key Benefits of Home Loan Balance Transfer
The major benefits of a home loan balance transfer are as follows:
Individuals have to pay lower interest.
Repayment terms are more relaxed.
One generally gets smaller EMIs and longer tenure.
Applicants can get a top-up on their existing home loan.
Individuals can also avail pre-approved offers.
New lenders usually tend to offer better customer service.
Features of Home Loan Balance Transfer
Repayment tenor is quite flexible and generally ranges from 20 to 30 years.
Require minimal documentation.
Individuals can customise their repayment options.
The loan which the new lender offers is free of end-use restrictions.
Most lenders do not have any foreclosure charges or part-prepayment clauses.
When and Why Should You Avail Home Loan Transfer?
Here are two reasons why one can consider opting for a balance transfer facility:
In case a borrower is paying a higher rate of interest towards a loan which comes with lower interest rates in other financial institutions.
Even after having a cordial relationship with the financier for a long period, the lender is unwilling to reduce the lending rate.
Ideally, a borrower should opt for a housing loan balance transfer facility after paying EMIs of an existing loan for 12-18 months.
How to Transfer Home Loan from One Lender to Another
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.
How to Calculate EMI on Home Loan Balance Transfer
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:
The principal amount of your outstanding home loan
The existing tenor of your existing loan
Current EMI paid on a monthly basis
The interest rate offered by the new lender
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.
Eligibility Criteria for a Home Loan Balance Transfer
Before applying, apart from arranging the necessary documents, you need to meet the eligibility parameters too. Find the requirements below:
You should have paid more than 12 monthly instalments.
The existing lender should not have any outstanding amount due.
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.
Necessary Documents Required for a Home Loan Balance Transfer
Here is a list of documents one must submit to refinance a home loan:
KYC documents, such as identity proof, address proof, PAN, Aadhaar, etc., are necessary.
An application along with a consent letter needs to be submitted to the new lender.
Foreclosure papers or the certificate that states that the borrower has successfully repaid the entire loan and has no outstanding left with the previous lender.
NOC or no-objection certificate from the current lender.
Home loan statement where all the details regarding the loan amount, applicable rate of interest, outstanding amount, etc., will be mentioned. In this document, the EMI and repayment history are also available, which are assessed by the new lender before approving the balance transfer request.
Property documents should also be submitted to the lender to initiate the process.
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.
Charges Associated with Home Loan Balance Transfer
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.
Difference between Home Loan and Home Loan Balance Transfer
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.
Things to Consider Before Availing of Home Loan Balance Transfer
Some important things one should consider before opting for a home loan balance transfer are as follows:
The possibility of a home loan balance transfer
Negotiating to lower the home loan interest rate
Gathering more information about the lender
Checking the market for more affordable rates and then comparing those rates
Calculating the cost of transferring the home loan
Read through the terms and conditions thoroughly and carefully
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!
FAQs on Home Loan Balance Transfer
Q1. Will a home loan balance transfer hurt my CIBIL score?
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.
Q2. How long does it take to refinance a home loan?
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.
Q3. Is there any maximum amount that I can transfer through a home loan balance transfer?
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.
Q4. Does the balance transfer process require a guarantor?
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.
Q5. Can I avail a top-up loan while refinancing my home loan?
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.
Q6. Does a home loan balance transfer affect your credit score?
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…
Are you looking to buy that house you’ve been eyeing 🏠 and you need a loan of up to ₹5 crore. Install the Navi app now and get instant in-principle approval right away! Interest rates starting at 8.39% p.a.
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.
Cristiano Ronaldo 7 ‘Dark’ Jokes, Football’s Bad Boy
100K+ Laid Off! 7 Ways to Be Financially Prepared for Layoffs
Looking Through SKY: Suryakumar Yadav’s Success Secrets🤫
10 Best Party Places in Bangalore: Rooftop, Brewery, Poolside
10 Best Christmas Gift Ideas Even Santa Wouldn’t Ignore
7 Tax Planning Tips You Cannot Ignore!
Save More! Check Out 10 Best Fuel Credit Cards in India
Inside Allu Arjun’s 100 Cr ‘Rectangle’ House
How to Earn Money on YouTube – Check 7 Sure Shot Ways!
7 Successful Women Entrepreneurs in India Who are Millionaires
We are a diverse group of writers, editors and Subject Matter Experts striving to bring the most accurate, authentic and trustworthy finance and finance-related information to our readers. Our mission is to simplify jargon and industry lingo. We believe sharing knowledge through relatable content is a powerful medium to empower, guide and shape the mindset of a billion people of this country.
What is Amortization? How to Calculate it while Repaying a Loan?
Amortization refers to the process of reducing a debt with regular payments. If you have taken a lo...Read More »
What is a Relinquishment Deed and How to Register Online?
A property may have more than one heir. In case one of the property owners want to give up their sh...Read More »
5 Home Loan Tips That You Should Consider
Buying a home is a dream come true for many. This is a crucial decision in someone’s life financi...Read More »
How To Pay Registration And Stamp Duty Charges in Chennai?
To get your property officially registered under your name in Chennai, you must pay stamp duty and ...Read More »
Housing Loan Interest Rates in 2022: 4 Factors That Can Affect Home Loan Interest Rates
With RBI increasing its repo rate to 5.40%, lenders have increased their home loan interest rates t...Read More »
How To Pay Property Tax In Delhi Online And Offline
The Municipal Corporation of Delhi (MCD) is the city’s municipality responsible for maintaining t...Read More »
What Are The Current Stamp Duty And Property Registration Charges In Telangana?
The state government in India is in charge of defining rules and standards and managing the collect...Read More »
What Are The Stamp Duty And Registration Charges In Thane?
In India, every State government levies a stamp duty on property transfers. The location, type of p...Read More »
How To Pay PMC Property Tax Online And Offline?
The Pune Municipal Corporation (PMC) collects the city's property tax from owners of residential an...Read More »
How To Pay Ghaziabad Nagar Nigam House Tax Online And Offline?
All property owners of Ghaziabad are liable to pay their property tax to the Nagar Nigam Ghaziabad ...Read More »
Gurgaon Property Tax: Tax Rates, Calculations And Payment Process
Property tax is a type of direct tax imposed by the state Government on all real estate properties,...Read More »
BBMP Property Tax: Tax Rates, How To Pay & Check The Status
The Karnataka State Government imposes this tax on the residents of the State who own properties in...Read More »
Diwali 2022: Diwali Holidays – The Festival of Lights
The ‘Festival of Lights’ is one of the biggest and most anticipated festivals in India. This is...Read More »
Best Index Funds – Top 20 Index Funds in India
Index funds replicate the performance of a stock market index, such as the Sensex or Nifty 50 to ge...Read More »