How does a loan home loan transfer work?


Purchasing a home is an expensive affair that requires a large amount of money. Therefore, a large number of potential home buyers resort to availing a home loan to finance the purchase of their dream house. Lending institutions offer enticing policies and attractive interest rates on home loans. The lower the interest rate on a home loan, the lower will be the repayment burden. Therefore, a large number of financial institutions have come up with the concept of home loan balance transfer.

Home Loan Balance Transfer

  • Home Loan Balance Transfer is a process that allows the borrowers to transfer their home loan to another lender that offers them better interest rates. This helps them to lower the EMI burden and loan tenure.
  • While opting for a home loan balance transfer, borrowers should meet the eligibility criteria set by the financial institutions. Different financial institutions have different parameters to approve the Home Loan Balance Transfer.
  • If borrowers have a clear repayment history, it improves their credit score as well as their chance of approval for Home Loan Balance Transfer. 

Procedure for Home Loan Balance Transfer:

  • You should submit an application to your existing lending institutions requesting for a balance transfer
  • You are also required to submit the information regarding the outstanding loan amount.
  • The existing lender will issue a letter of consent, a no-objection certificate (NOC), a foreclosure letter, a list of property documents (LOD), and a loan statement showing your EMI payment history.
  • Then you will have to apply to the new lender, and submit all the documents that are needed when applying for a fresh loan.
  • The process of Home Loan Balance Transfer involves minimal documentation. Lenders usually require documents supporting your ID proof, address proof, purchase of property and regular payment of EMIs.
  • You will also be required to submit an NOC from your builder/society, along with the documents procured from the first lender.
  • The new lender asks you for income proof, you will have to submit your salary slips for the last three months and your IT returns/Form 16 for the last two years. Additionally, you will also have to submit your bank statements for the last three months.
  • The new lender will verify all documents, look at your repayment history, creditworthiness and evaluate your home loan balance transfer eligibility.
  • If the loan is approved, the new financial institution will give a cheque of the balance principal amount to your old lender. The previous lender will then transfer all your loan papers to the new lender.
  • Finally, to complete the transfer process, all post-dated cheques that lie with the old lender will be canceled.

However, opting for a home loan isn’t recommended if you have already completed a major portion of your loan tenure. This is because you will have to pay a balance transfer processing fee and other charges involved in a home loan balance transfer. By paying such charges, you may end up paying even more amount than required. Hence, you must evaluate all the aspects of a home loan balance transfer carefully before going ahead with it.

Some of the major benefits of availing a home loan balance transfer are mentioned below:

Lower interest rates:  Home loan balance transfer can help you in lowering the interest rate on your home loan. This can help you save a large amount in the long run. Since home loans are usually self-secured, a lot of financial institutions offer loans at lower interest rates.  

Pre-payment facilities: Even if you opt for a home loan balance transfer, you can still make use of the pre-payment facility. Therefore, the loan can be pre-closed at the borrowers’ discretion.

Top-up value: As a result of the high top-up value, you can repay the loan quickly without spending a large amount towards interest.

However, before opting for a home loan transfer, you should check the eligibility criteria.

Eligibility Criteria for Home Loan Transfer

  • The property must be ready to occupy or already occupied.
  • You must have paid more than 12 EMIs.
  • There shouldn’t be any outstanding dues on your existing home loan.