How a Home Loan Balance Transfer Works?
How does Home Loan Balance Transfer Works
You’ve recently settled into the house of your dreams and have begun making monthly payments toward your loan. While the terms and conditions that you agreed upon with your lender seemed feasible at the time, you quickly realise you aren’t happy with your Home Loan conditions, and want different interest rates and other conditions that you’re more comfortable with.
Luckily, there is a solution for you in the form of Home Loan balance transfer. This article will walk you through how a Home Loan balance transfer works.
Home Loan Balance Transfers Explained
So what is a Home Loan balance transfer? It is simply the process of switching your Home Loan to another lender to avail of lower rates of interest.
A Home Loan transfer is usually used to avail the benefit of a lower interest rate prevalent in the market. Trying to negotiate with your present bank to lower the interest rate should always be your first option, but if the bank is not compliant, consider a Home Loan balance transfer to a bank which offers a lower interest rate.
Balance Transfer Procedure
In order to begin the Home Loan balance transfer process, there are some specific steps that you must take:
- You will first need to submit a letter to your existing lender, requesting for a balance transfer.
- They will then give you a letter of consent, a no objection certificate (NOC), a foreclosure letter, a list of property documents (LOD), and a loan statement that shows your EMI payment history.
- Now you have to apply to the new lender, and submit all documents that are needed when applying for a fresh loan.
- First submit the application form, along with your photograph.
- You will also have to submit an identity proof, a date of birth proof, an address proof, and a signature proof.
- Next, submit documents that prove the ownership of the property for which you are taking the loan.
- You will also have to submit an NOC from your housing builder/society, along with the documents procured from the first lender.
- Next, the new financial institution will ask you for proof of income. You will have to show them your salary slips for the last three months and your IT Returns/Form 16 for the last two years.
- Furthermore, business continuity proofs like an appointment letter will be required.
- Finally, bank statements for the last three months will also have to be submitted.
- The new lending institution will verify all documents, look at your financial history, and evaluate your Home Loan balance transfer eligibility.
- If the loan is granted, the new lender will hand over a cheque of the balance principal amount to the old lender. The latter will then transfer all your loan papers to the new firm.
- Finally, your post-dated cheques that lie with the old financial institution will be cancelled.
- The transfer process will then be complete.
What to Expect When Taking a Home Loan Balance Transfer
Now that you understand the Home Loan balance transfer procedure, here are some other things you should watch out for.
Generally, there will be some Home Loan balance transfer charges incurred as you transfer your loan. While most banks have waived it, some still charge a prepayment penalty. It is important to check with your bank about their policies with Home Loan transfers before proceeding. If a large penalty payment is at stake, it might be financially wiser to stay with your original lender. Along with this, you will also have to pay a processing fee to your new lender. This can be anywhere from 0.5% to 1% of the loan amount you are applying for.
Other Points to Consider
Each financial institution has their own set of Home Loan balance transfer rules to take into consideration. It is extremely important to inquire about these rules and determine whether the benefits of transferring your Home Loan outweigh the drawbacks. Additionally, any financial institution will need to evaluate your credit score, obtain legal verification of your property documents, and complete other procedures. Once these items have been reviewed, your balance transfer will either be approved or denied.
Bajaj Finserv eliminates much of the stress involved with these procedures by allowing you to apply for a Home Loan Balance Transfer online.