You can swap your existing home loan to a different lender with better terms and conditions via a home loan balance transfer programme. Let’s say your current lender charges you an interest rate on your house loan of 11% each year. You might switch your mortgage to a different lender with cheaper home loan interest rates, such as 8% p.a (provided the lender offers a home loan balance transfer). This will not only enable you to pre-close your loan but also save you money on the interest that must be paid.
Learn about the features and benefits of home loan balance transfers, the paperwork requirements, fees and costs, EMI calculations, and more. Continue reading!
Now let’s understand how to transfer home loan from one lender to another.
Step-by-step process you can follow for refinancing your existing home loan:
- Step 1: Visit your desired lender’s internet portal.
- Step 2: Review the terms and conditions and confirm the processing charge and interest rate.
- Step 3: Complete the application for the balance transfer and submit it if, after weighing your options, you decide to move forward with the home loan transfer. Include accurate information, such as the type of property, the name of the lender, etc maru gujarat.
- Step 4: Submit the application form with all the relevant documentation for the transfer of the mortgage. Also, get the existing financial institution’s consent letter and include it with your submission.
- Step 5: Following this, you will be able to review the loan offer and the associated expenses.
- Step 6: After making that payment, you can wait a few of days for the paperwork to be validated and your application to be granted. Your new lender will then settle the remaining debt owed to the previous lender.
Your account will be cancelled, and the title documents will be given to you once the full payment has been paid.
What Are The Advantages of a House Loan Balance Transfer?
Following are the main advantages of transferring your mortgage balance:
- Interest rates for individuals must be lower.
- The terms of repayment are more flexible.
- A longer tenure and lower EMIs are typical.
- Candidates may receive a top-up for their current mortgage.
- Pre-approved deals are also available to individuals.
- Customers are typically treated better by new lenders.
Home Loan Balance Transfer Features
- The repayment period is relatively nimble and typically lasts between 20 and 30 years.
- Very minimum documentation is needed.
- People can personalise their repayment arrangements.
- There are no end-use limits on the credit that the new lender is providing.
- Most lenders do not include terms allowing for partial prepayment or foreclosure charges.
For a House Loan Balance Transfer, the Requirements
In addition to gather the required paperwork, you must also meet the eligibility requirements before applying. The prerequisites are listed below:
- You must be an NRI or an Indian citizen.
- The age range should be between 23 and 65.
- The present lender should not owe you any money.
- You should have made more than 12 monthly payments.
It should be noted that qualifying candidates will undoubtedly find it simpler to obtain fast approval from HDFC Bank as well as competitive interest rates while renewing the home loan.
Required Paperwork for a House Loan Balance Transfer
The following set of paperwork is required when refinancing a mortgage:
- KYC documentation, including identification and residence proofs, PAN and Aadhaar numbers, are required.
- The new lender must receive both an application and a consent letter.
- The notice of foreclosure or the certification that the borrower has fully repaid the loan and has no outstanding balance owed to the previous lender or no-objection certificate from the current lender.
- Home loan statement, which will include information on the loan amount, applicable interest rate, outstanding balance, etc. The EMI and repayment history are also provided in this document, and the new lender considers these factors before granting the balance transfer request.
- The lender should also receive property documentation to start the process.
Some lenders may also request extra home loan transfer documents, such as post-dated checks, loan agreement paperwork, etc., in addition to these basic document requirements.
When should you use a home loan transfer, and why?
Here are two justifications for using a balance transfer facility:
- When a borrower is paying a higher interest rate on a loan that is offered by another financial institution at a cheaper interest rate.
- Despite having a long-standing friendly relationship with the financier, the lender is unwilling to lower the lending rate.
After making EMI payments on an existing loan for 12 to 18 months, a borrower should ideally choose a home loan balance transfer option.
How to Calculate EMI on a Balance Transfer of a House Loan
It is essential to assess the new monthly instalment amount before applying because the goal is to significantly reduce your EMI payments. The following variables affect how much you can save:
- The principal balance of your outstanding house loan.
- The loan’s current term.
- The monthly payments you are currently making.
- The interest rate being provided by the new lender.
To comprehend the variation in EMIs, use the home loan balance transfer calculator. After performing these assessments, be sure to select the lender because the rate of interest differs among lenders.
Fees for House Loan Balance Transfers
When you transfer the balance of your house loan, there are additional types of fees and costs besides the interest rate. While choosing a house loan balance transfer, borrowers should be aware of two significant fees:
- Processing fee – This is the charge that the borrower must make to the new lender for the loan to be approved and transferred from the prior lender. Moreover, the processing fee often amounts to 6% of the total loan amount.
- Foreclosure fees — In order to close the loan account, borrowers must pay a specific sum of money to the prior lender. The rates of floating house loans do not apply to these fees. However, the fees increase to 4% of the outstanding principal for house loans with fixed interest rates.
Home Loan Vs. Home Loan Balance Transfer
It could be difficult for a new borrower to tell a house loan from a home loan balance transfer. Here are some specifics to help you comprehend it:
1. A mortgage
This secured credit facility enables people to borrow significant sums of money for the purchase of a home or piece of land, as well as for the development of any type of property. For the loan application to be authorised, specific documentation must be supplied.
2. Balance transfer on a mortgage
Refinancing your current home loan with a different lender who is giving a cheaper interest rate is what this process entails. Due to the prior determination of your eligibility, there is less paperwork required.
Considerable Before Availing of Home Loan Balance Transfer
When choosing to transfer the balance of a home loan, one should think about a few key factors.
- The potential for a balance transfer on a mortgage.
- Trying to reduce the interest rate on the mortgage loan.
- Learning more about the lender
- Looking around for lower rates and comparing them.
- Figuring out the cost of refinancing; and, most importantly, carefully reading the terms and circumstances.
Opting for a home loan balance transfer helps reduce the interest rate and loan burden on the borrower significantly. Refinancing for a home loan is a suitable option for making substantial savings on interest costs. That said, keep in mind that it is not wise to opt for this facility if you are approaching the end of your existing loan and just have a few EMIs left. Also, before opting for a home loan balance transfer read the terms and conditions carefully and calculate the EMIs and other charges. For hassle-free home loan balance transfer, download the HDFC Bank application now!