Everything You Need To Know About Home Loan Balance Transfer Process

Buying a home is a major financial commitment, and also an expensive affair. Most opt for a home loan which can be difficult to pay off due to high-interest rates or other financial burdens. What if the borrower finds a home loan with better rates and conditions?

This is when it's time for a home loan balance transfer!

What Is Home Loan Balance Transfer?

Home Loan Balance Transfer is a service that allows you to switch your Home Loan balance from one bank to another. A person can transfer their home loan from their current bank to a new bank if they believe they can get better terms on the loan they previously took out from the new bank.

Once you have selected a new bank to move your Home Loan, the new bank pays the parent bank the outstanding amount and closes your existing home loan account. 

What Is The Process To Transfer Home Loan?

You can easily initiate your home loan balance transfer process by following the steps mentioned below:

How Does A Home Loan Balance Transfer Process Work?

Your home loan is transferred to the new bank in the following way:

What Is The Eligibility criteria For Home Loan Balance Transfer?

You have to satisfy the requirements established by the new lender to choose a home loan balance transfer. While these differ, there are a few requirements that are common among all lenders.

These criteria vary from bank to bank and region to region. Thoroughly check all the required details and see if you qualify for the loan before proceeding with the bank.

What Are The Documents Required for A Home Loan Balance Transfer?

The borrower must secure and submit the following documents to successfully complete the home loan balance transfer. 

Documents Required From The Existing Lender

Documents Required To Submit To The New Lender

What Are Home Loan Balance Transfer Charges?

The lender cannot impose any foreclosure fees on floating rate loans where you wish to transfer your home loan per Reserve Bank of India (RBI) regulations. On fixed-rate loans, certain banks may impose a pre-payment penalty fee ranging from 1% to 3%. 

What Are The Benefits of Home Loan Balance Transfer?

Lenders are becoming more and more eager to provide pre-approved Home Loan Balance Transfers to customers with excellent credit ratings. Before opting for a home loan balance transfer, borrowers must understand how they can benefit from it.

Here are some advantages of transferring your home loan from one bank to another. 

Lower interest rates

The main advantage of choosing a home loan balance transfer is the reduced rate of interest. Since you can opt to choose any bank, consider a bank or housing finance company that offers a lower interest rate with better perks than your existing bank. Even a tiny change in interest rate can have a significant impact on your overall payment. Additionally, it will be less of a burden on your EMIs.

Better Loan Terms

Each home loan that banks and housing finance companies offer will have a different set of features. You may want to think about switching your loan to a different lender if you are not satisfied or need some particular features that your current lender does not provide. But before you transfer your outstanding debt, make sure the new lender has the features you need and will save you money.

Longer Repayment Tenure

A home loan balance transfer can give you a longer loan tenure if the current EMIs are too expensive for you to afford. Choose an HLBT, and the new lender can provide you with a loan with a longer term so that you can comfortably repay the loan. Longer loan terms would mean lower EMIs, which would ease your EMI burden. However, selecting this option would result in higher overall interest costs.

Better Lender Experience

Most people favor good customer service because home loans typically last for a longer period. You might experience a variety of problems after obtaining a loan, such as untimely service at a service desk, the failure to update personal information despite extensive follow-up, frequent changes to the terms and conditions, etc. 

Therefore, if you are unhappy with the services provided by your current lender, you can change to a different lender if their requirements match yours. But before switching lenders, be sure to look into all the other possibilities.

Conclusion

Home loan balance transfer allows homeowners with long-standing home loans to enjoy the benefits of lower interest rates, longer tenure, and a decrease in monthly payments. No matter the reason, it is wise to check all the terms and conditions offered by the new lender and compare the benefits they offer with the existing lender before applying for it. Moreover, a home loan balance transfer makes sense when you still have a considerable amount of time left on your home loan. Since a Home Loan balance transfer is also a long-term commitment, do a cost-benefit analysis and make an informed decision. 

Home Loan Balance Transfer FAQs

Yes. Your credit score is crucial in the process of a home loan balance transfer. You must have a good credit score and history to qualify for the process. 

Here are a few circumstances when you should choose a home loan balance transfer:

  • Long loan tenure 
  • Substantial outstanding balance
  • Overall reduction in the loan amount

No. The transfer process shows no impact on your credit score. You must repay the loan in installments for your credit score to improve.

Yes. Some banks charge processing fees while others waive the fees off. 

Yes. You can. However, the fees incurred will be higher each time you change lenders.

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