Simplifying the Home Loan Balance Transfer Process
Home loan balance transfer refers to the process of transferring one's home loan from one's current lender to another offering better loan terms and conditions. In the majority of cases, borrowers opt for a home loan balance transfer when another lender is offering them a lower interest rate. A lower home loan interest rate directly translates into low EMIs as well as reduced interest outgo in the long run. However, as a general rule of thumb, borrowers benefit from a home loan balance transfer only when the remaining loan tenor is atleast 15 years and the difference in current home loan interest rates and the new home loan interest rate being offered is at least 25bps. If the remaining tenor is 10 years, the difference in the interest rate must be atleast 50bps for the home loan balance transfer to prove beneficial. Borrowers must know that a home loan balance transfer involves a fee and therefore, one must opt for this facility after performing thorough cost-benefit analysis. A home loan balance transfer calculator can prove handy in this regard.
When home loan borrowers opt to switch lenders, other than negotiating for a lower interest rate, they can also ask for a change in the interest rate regime and loan tenor. Further, they can also avail of a top-up loan, which comes with zero end-use restrictions. However, to be eligible for a home loan balance transfer, you must meet your lender's home loan eligibility requirements. Further, all lenders treat home loan balance transfer applications as new applications and therefore, approval and disbursal takes time, usually a few weeks.
Now that we are familiar with the basics of a home loan balance transfer, let us walk the readers of this article through the home loan balance transfer process.
Home Loan Balance Transfer Process Explained
If you are planning to apply for a home loan balance transfer, the process will include the following steps:
1. The first step would be talk to a couple of different lenders in the market and figure out which lender is willing to offer you the most lucrative deal. Make sure you are choosing the right lender and the only way to do this is through thorough research and by talking to as many different lenders as you can.
2. Once you have found a lender willing to offer you a housing loan on better loan terms and conditions than your current lender, you must inform your current lender of your intention of transfering your home loan to another lender. This will require you to write a letter to your current lender requesting them to allow you to transfer your home loan and return all the documents you had submitted to them at the time of applying for the loan.
3. If there is no clause in your loan agreement that forbids you from transfering your home loan to another lender and your current lender accepts your request, you can go ahead and submit a home loan balance transfer application form with your new lender.
4. At this point, we must reiterate that your new lender will treat your home loan balance transfer application as a new home loan application and will decide on whether they can grant you loan after performing all the required technical and legal verification. Thus, they will require you to submit KYC and income proof documents while applying for the loan.
5. If your new lender approves your home loan balance transfer application, they will pay off your old lender.
6. Once this is done, your old lender will close your loan account, release all the property papers they have with them and also release a No Dues Certificate, which will clearly state that your old lender has no legal rights over your property. Borrowers opting to go for the home loan balance transfer process must never forget to collect the No Objection Certificate. This is an important document that can prove really helpful in case of a legal altercation between you and your new lender.
7. Once your old lender has released all the property papers, you will need to submit them to your new lender and after this is done, your EMI obligation will be towards your new lender.
If you are planning to opt for a home loan balance transfer, there are two things you must keep in your mind. We previously mentioned in this article that home loan balance transfer involves a fee. Lenders charge this fee as a percentage of the total loan amount. Since home loans run into millions, the home loan balance transfer fee can turn out to be a hefty amount. A borrower must opt for a home loan balance transfer only when the new interest rate is low enough to help the borrower save money after paying the home loan balance transfer fee. Second, your new lender will give you the option of a top-up loan. Avail of this loan only if you really need the money and plan to invest it for better returns. While the interest rates on top-up loan are low and these loans come with a flexible repayment period, you would not want to increase your EMI burden unnecessarily. A home loan balance transfer can prove to be highly beneficial, however only if a person avails of this facility after careful consideration and proper planning.
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