A home loan balance transfer occurs when a borrower with an existing home loan transfers the loan to a different lender. You can choose to transfer your home loan because of numerous reasons. Normally, this is done by borrowers in case they find the high interest rates of their existing lender too high to continue with. Though there are numerous advantages of home loan balance transfer, it can be a stressful process. So maintain a high level of caution and proceed carefully.
Tips To Make A Home Loan Balance Transfer Work in Your Favour
The success of a home loan transfer depends on numerous factors. Take these factors into consideration to benefit from your home loan refinancing.
- Do Your Research: Conduct an extensive research on the various lenders out there and the interest rates that they offer. You are sure to find many deals, so be sure to choose the lender who offers the lowest interest rate. Apart from low interest, choose lenders who offer favourable terms and incentives on loan transfers.
- Ensure You Have Money To Pay For Interim Security: When performing a transfer, it is natural for a lender to want security to protect its interests. Hence, certain lenders may ask for an interim security to be transferred to them during the transfer process from the old lender to the new lender. Though this payment is usually refundable, it is important for you to make financial provisions required for paying for this security deposit.
- Collect All Your Important Documents: After choosing a lender, your next move should be proceeding with the application procedure. This may require multiple documents. Organize and collate all your important documents like the loan sanction letter, present loan agreement, address proofs, identity proofs, photographs, stamp duty and registration of your property, IT returns, etc. Remember that you will need all the documents needed to apply for a fresh loan.
- Get Ready For The Lender To Verify All Details: Once all the essential documents have been submitted, the new lender will perform a verification of all your details including your credit score. It is important that you prepare for this inspection and clear the verification tests of your lender.
- Make Sure You Get All The Appropriate Approvals: Once you are through with the formalities of the new application, it is important to get the approvals of both your old lender and your new lender. Submit a formal application of loan transfer with your existing lender and get a consent letter or no objection certificate regarding your transfer. Then make sure the new lender gives you the approval.
- Collect and Sign Your Loan Agreement: You new lender will give you a draft of your new loan agreement, which you will need to sign. Then you will receive a formal letter that sanctions the loan. Keep the agreement and the loan sanction letter carefully with you for future reference.
- Make Sure The Property Documents Are Transferred: Once you get the application of transfer done, your existing lender will need to transfer important property documents to the new lender. This is an important step, and you should make sure that your documents do not get misplaced during the process.
- Pay The Balance And Confirm The Same With Your Existing Lender: Based on when you transfer the loan, you will need to pay off any balance dues to your old lender. Before you move to the new lender, ensure that you have paid whatever is owed and that you have a receipt to prove it.
- Do Not Agree To A Longer Repayment Tenor With The New Lender: Even at a lower interest, increasing the tenor drags out the EMIs and makes you end up paying more interest. Try to repay your new home loan quicker, and since reduced interest leads to reduced EMIs, you can actually do this without breaking a sweat.
- Make Sure You’re Aware of The Cost of The Transfer: Balance transfer usually includes not only a processing fee and stamp duty but also legal and technical charges, valuation and verification fees, etc. Your existing lender may also levy a penalty. Make sure there are no hidden costs and you know exactly what you are paying. Then see if doing the transfer still saves you money.
- Find Out If The New Home Loan Interest Rate Is Based on MCLR: Due to the recent economic scenario, the MCLR rate is low. Since the RBI has asked lenders to revise their home loan interest rates based on MCLR, new borrowers stand to gain a lot. During your balance transfer, find out if the new lender’s interest rate is based on this lending system—and also find out how much the interest will increase in the next year. This will ensure that you not only pay a low interest rate but are also prepared for the future.
- Enquire About A Top up Loan: Doing a balance transfer may also give you access to a cheap top up loan that you can use for a reason of your choosing. With low interest and long repayment tenor, this can be of great help to you. Make sure your new lender offers you a good top up loan down the line by enquiring about it when you make the transfer.
Do a Balance Transfer with a trustworthy company like Bajaj Finserv, which offers low interest rates of about 8.35% (limited period offer) and benefits like flexible repayment and a top up loan that can come in handy when you need additional finances.