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:

• Go to the website of the bank you wish to transfer your home loan to.
• Thoroughly check the interest rate, processing fee, terms and conditions, and other necessary details before applying for a balance transfer.
• Fill in the required fields such as your name, property type, tenure of the existing loan, the bank’s name, and more.
• Once the details are filled in, you will be shown your loan offer.
• If you are satisfied with the offer, pay the fees and upload the needed documents.
• Submit your application and wait for the approval from the bank.

How Does A Home Loan Balance Transfer Process Work?

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

• The individual opting for the balance transfer must obtain the necessary documents from his/her current lender.
• Along with the documents, a consenting letter from the existing bank along with the outstanding loan amount is also necessary.
• These documents must be provided to the new bank.
• The new lender will then pay off the balance due to the individual’s old lender.
• Once the due is paid, the old home loan account will be closed, 
• This means that all the payments towards the loan will have to be paid to the new bank.
• The property documents related to the loan are then transferred to the new bank, officially completing the home loan balance transfer process.

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.

• The borrower must be a citizen residing in India.
• He/she must be between 23 to 65 years of age to qualify for a home loan balance transfer.
• The borrower must have completed at least 12 EMIs with their existing lender.
• There must not be any outstanding amount due to the existing lender.
• To qualify, applicants must be salaried or self-employed professionals.
• The borrowers must live on your property or be ready to move in.

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

• Letter of consent for the loan transfer
• NOC (no objection certificate) that states your lender has no issues with the home loan balance transfer process
• Home loan statement consisting of your EMI repayment history and the outstanding balance amount
• Property documents
• Post-dated cheques submitted while taking the loan
• Foreclosure Letter, once the new lender pays the outstanding loan amount

Documents Required To Submit To The New Lender

• KYC Documents - Voter ID, PAN card, Aadhaar card, or driving license, for your identity.
• Address proof - Passport, Voter’s ID card, Driving license, or Aadhaar card to verify your address details.
• Financial Documents - Form 16, salary slips, Bank statements for 6 months
• Documents related to the existing home loan - Loan agreement, home loan statement, NOC, letter of consent, foreclosure letter, etc.
• Property-related documents - proof of ownership, NOC from the developer, registration documents, and stamp duty payments.

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.

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.