What is the Process of Home loan balance Transfer

Home loan balance transfer is a way to transfer your unpaid principal amount of the loan to any other bank offering better benefits and lower interest rate. To know more about balance transfer read here.

Suppose a Situation– You have shifted to your newly purchased home and you are paying your monthly EMI towards your home loan. When you opted for the home loan, youfound the terms and conditions to be feasible, but now you have identified that some other lender has a better interest rate with more home loan offers and benefits. In such a case you change your lender and the process is known as home loan balance transfer.

Every bank allows the facility of balance transfer and if you have repaid your loans regularly then transferring to a different bank isn’t a problem.

When Is Balance Transfer Ideal?

Balance transfer requires a processing fee, so before getting into the transfer process, one needs to look for the cost-benefit analysis. Balance transfer depends upon the tenure, remaining loan amount and difference in the interest rates. If the remaining tenure and the remaining amount is less, then balance transfer wouldn’t be an ideal option.

Balance transfer process works well if it is done in the earlier years of the home loan. 

Working of home loan balance transfer

If you are planning for the home loan balance transfer, here are the few steps that you would be required to take.

You would be required to submit a letter to your existing lender and request for the balance transfer.

The banks would produce a letter of consent, with a No Objection Certificate (NOC), a foreclosure letter, all the property documents, loan statement stating the Past EMI payments.

Next step is to apply to the new lender with all the documents required for applying a fresh home loan

• Fill and submit the application form, along with the passport size photograph
• Submit the documents – identity proof, date of birth proof, signature proof
• Documents proving the ownership of the property for which the loan is taken
• NOC from the builder and the documents received from the previous lender
• Last 3 months salary slips and IT returns for the last 2 months/Form 16
• Bank statement for the last 3 months

The new lender will verify your details and upon approval will give a check of the balanced amount to 1st lender. After receiving the cheque, the 1st lender would transfer all the loan papers to the new lender.

Each financial institution has its own charges for a balance transfer; it can range somewhere between 0.5 % to 1% of the loan amount. So before applying for a balance transfer, it is paramount to inquire about the charges, the formalities, or if any penalty charges are included.

Also, another important factor is that banks do not allow their borrowers to go to some other lender, so possibly they can themselves revise the rates of interest and take up the offer that has been given by you. Sometimes the banks also choose to lower your tenure with the same EMI that means you pay lesser interest over your home loan.