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