A home loan balance transfer, as the name suggests, is the process of transferring your existing home loan to another lender. However, it is done because the new lender is offering a lower rate of interest as well as other perks. It is similar to availing a new housing loan.
When a borrower makes a balance transfer, the total outstanding loan amount is transferred to a new account, the new lender pays the remaining balance to the previous lender and the account is then closed. The new home loan interest rate will help the borrower save on EMIs and the interest outgo on a housing loan. You can find more opportunities online via using Spectrum customer services. they provide smooth internet service es.
Why Should You Balance Transfer?
A home loan usually involves a large sum of money, and the interest rate is steep in our country.
Over a 20-year term, a borrower will end up paying about 2.5x of the loan they have availed of. For instance, an INR 1 crore loan can result in a payout of INR 2.5 crore over 20 years.
Even if the home loan interest rate drops by 0.5%, the interest rate in the loan can make a difference in the overall EMI outgo. A way to reduce the rate is to discuss it with the existing lender. If they do not agree, there is always an option of home loan balance transfer to a new lender.
Who Can Apply for a Home Loan Transfer?
- Salaried individuals (employed in the government and the private sectors)
- Professionals (i.e., architects, chartered accountants, doctors, dentists, cost accountants, engineers, company secretaries, management consultants, etc.)
- Self-employed individuals and those filing ITR
- Individuals who are above the age of 21 years and not over 60-65 years
If you are a premium banking customer of your chosen lender, you can reach out to your relationship manager for details on special benefits.
The Documents Required For a Home Loan Balance Transfer Are:
- All property documents in possession of the existing lender
- A copy of the home loan statement
- Bank statements of the last 12 months of the account from which the EMIs had been debited
- No objection certificate or NOC or a consent letter from your existing lending institution
In Addition to The Above, The Lender May Also Require:
- Income statements
- Payslips
- Form 16
- Latest ITR
- Age proof (Passport, PAN, Aadhaar, Driving License, etc.)
- Address proof ((Passport, Aadhaar, Driving License, utility bill, etc.)
- Photo identification proof (Aadhaar, PAN, Voter, Passport, Driving license, etc.)
The documents must be shared with the lender along with the filled application form.
When Transferring Your Home Loan Balance, Keep the Following in Mind:
- Do not get tempted by the teaser home loan rates – At times, financial institutions can try to allure you by offering lower fixed home loan rates for a limited phase, say the initial years, and then onward readjust or raise rates to floating interest (per market standards). You must stay away from such housing loan teaser schemes as when the interest rates are increased, it outdoes the benefits that come with a lower rate enjoyed for a couple of years, making it all quite futile.
- Weigh the pros and cons – As you may know, besides home loan interest there are several costs affixed to a home loan in India viz. stamp duty, processing fee, legal charges, valuation fees, and other transfer-specific technical charges. Hence, when you mull over transferring your housing loan balance, check if the pros outweigh the cons.
- Go through the fine print – In addition to what is clear to the naked eye, finer details are written in the terms and conditions. Make sure you go through those carefully to know about the hidden costs, loan-to-value ratio, prepayment penalties, etc.
- Opt for a new lender that can offer you the best experience – Speak to home loan customers and check reviews of the new lender to learn from their experiences. This will help avoid unpleasant surprises later on. Opt for a home loan transfer with a reliable lender who is known for offering reasonable rates and terms and conditions.
Top-up on Home Loan Balance Transfer
A top-up home loan is a facility that can be sanctioned with a balance transfer and can be taken over the home loan. When borrowers are executing a balance transfer, they get the flexibility to borrow some extra funds from the lender at existing rates.
Availability of a top up home loan becomes easy when doing a home loan balance transfer. It comes in handy when there is a sudden requirement of funds that can be used for purposes like personal use, home’s interior, or a child’s education. Generally, only 25% of the principal home loan amount can be taken as a top-up loan. When you opt for a home balance transfer, you may get a top-up at a significantly lower home loan interest rate.
To Conclude
The transfer of home loan balance or home loan refinancing is beneficial as it lowers your EMIs, helps you save up on the total interest outgo, shortens your home loan tenor, potentially increases your credit score, and help you avail of better service. However, be careful and check that the advantages outweigh the disadvantages before making a decision. Accounting for factors, such as interest rate, outstanding home loan amount, remaining home loan tenor, transfer costs, and related services is crucial when considering a home loan balance transfer. A pro tip: You can make use of the home loan balance transfer calculator to check your EMI outgo and plan accordingly before you make the final move.
