So, the deal’s finally done between you and the lender. The loan amount will soon be sanctioned and you’ll go about buying the property you’ve eyed for a long time now. Once that’s done and dusted, you’ll have to start repaying the debt.

However, during the process of returning the money you owe, there can be certain stipulations in the agreement that might not sit well with you. It can be the interest rate, the services offered, or non-compliance to your requests.

This is a situation where you can opt for a Home Loan Balance Transfer. Simply put, it’s a process where you transfer the loan balance to another lender with better terms and conditions.

A Home Loan Balance Transfer with a Top-up Loan is another possibility in case of such a switch between lenders. It allows you to avail of an additional loan amount over and above the amount of the Home Loan that you are transferring to the new lender. A Top-up Loan is generally made available at a slightly higher rate than the rate being offered for a Balance Transfer, but is substantially lower than a Personal Loan rate.

Differences between Home Loan and Home Loan Balance Transfer

A Home Loan is subjected to a transfer when there are certain terms and conditions set by the lender that you can’t digest. The primary factor behind the switch is the rate of interest. It’s obvious that borrowers start applying for a transfer because they find lenders who offer a lower rate of interest. Bajaj Finserv, for instance, offers attractive interest rates that will make your repayment process a breeze. They also offer features like – Online Application Process, Instant Online Approval, Minimum Documentation, Additional Top up loan at attractive rates, No Hidden charges, Customised Insurance Schemes, and Online Account Access. They also offer facilities like NIL Part Pre-Payment charges, NIL Foreclosure charges, and 3 EMI Holiday.

Another difference is the availability of a refinancing option. The Home Loan Balance Transfer and Top up plan allows you to transfer the unpaid amount to the new lender with the possibility of gaining additional funds. These funds would be the difference between the initial requested amount and the offered sum. A Home Loan does not work on this principle. There isn’t any refinancing option and you generally only get about 85% of your requested amount.

The Benefits of Balance Transfer

The key benefit of a balance transfer would obviously be the low rate of interest. This can help you in the long run as you’ll have to pay lesser to your lender, helping you to save more. Some lenders also offer fixed or floating rate of interest. However, your choice should depend on your monthly income, expenses, and knowledge about the rise and fall of economy.

The other advantage is that by using the refinancing option you can get 100% of the original Home Loan amount at lower interest rate. Refinancing a Home Loan can sometimes be helpful in easing financial burden as you get access to more funds and pay lower interest charges.

Eligibility Criteria for Home Loan Transfer

Although eligibility for Home Loan Balance Transfer differs from lender to lender, the following criteria remain constant across most lenders. Your application only gets approved, if you meet each and every stipulation.

  • You must be a self-employed or a salaried professional drawing a monthly salary
  • You must be fall in the age bracket of 21-60 years
  • Possession of a good CIBIL score—this score contains your credit history with details of your financial stability
  • Stellar financial details that mention your capacity to repay the loan and the stability of your income
  • Employment details to prove that you work at a stable organization with chances to earn more in the future

Documents for Home Loan Balance Transfer

Here are the documents for Home Loan Balance Transfer process required by financial institutions:

  • Copy of property documents
  • Details of the outstanding loan amount
  • Foreclosure letter

For Salaried Candidates

  • Employment certificate
  • Pay slip copies
  • Tax Deducted at Source (TDS) certificate
  • Bank statements and latest Form 16 issued by the employer

For Self-Employed Individuals

  • Copy of audited financial statements for the past couple of years
  • Copy of the partnership deed if the venture is co-owned
  • Copy of Memorandum of Association (MOA) and Articles of Association (AOA)
  • Profit and loss account details for the last few years
  • Income tax assessment details

Home Loan Transfer Procedure

A Home Loan Balance Transfer process involves a series of steps that must be carefully followed at all costs if you’d want the switch to be successful.

Here’s how you go about filing for one with your lender(s):

  • First, you must place a request for a transfer by submitting a letter to your current lender
  • If they agree, a letter of consent, no objection certificate (NOC), foreclosure letter, and a loan statement reflecting your repayment track record will be presented to you
  • Then approach the new lender by filling up the application form with your photograph and submitting the documents mentioned above
  • Identification, address, date of birth, and signature proofs must also be submitted
  • You’d then have to provide proof of your property’s ownership
  • NOC from builder or contractor
  • Proof of income with salary slips, bank statements, Form 16, and IT returns
  • Business continuity proofs like appointment letter
  • Once you pass the eligibility and verification of documents, the lender will submit a cheque of the balance loan amount to the old lender
  • Once your old lender receives it, the transfer of outstanding debt takes place with the cancellation of post-dated cheques

Always on the Lookout

The miscellaneous charges associated with the transfer is one area you must always focus on before making the switch. Although some lenders have completely waived off these charges, there are still a few who impose a fee for prepayment. If the penalty is quite high, it’d be best to stick to your old lender. NBFCs like Bajaj Finserv offer benefits like Nil Part Pre-payment charges, Nil Foreclosure charges and Zero Hidden costs on their Home Loan Balance Transfer.

Besides this charge, some lenders also demand a processing fee that is 0.5-1% of the loan amount. This is the reason why you must always utilize a Home Loan Balance Transfer Calculator to take stock of the situation, compare policies, and plan well.

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