Everything you should know about Refinancing, Home Loan Balance Transfer, and Top Up Loans
Everyone nurtures a dream of being a homeowner, a home loan is imperative when it comes to realising this dream. A home loan is chosen when you want to buy a property for living or for investment purposes. And if you have already completed the task of selecting your ideal home, the next logical step is choosing a financially beneficial home loan. Since market rates are constantly varying, and lenders are continually upgrading their services, it is entirely possible for even the most experienced buyers to fall for an unprofitable deal. Fortunately, you do not have to keep suffering from high interest rates or bad service once you’ve realized that there are better offers from top financial companies customized for you. You can approach them and choose a home loan balance transfer to avail the benefits of an ideal home loan.
What is a Home Loan Balance Transfer or Refinance?
In the finance world, a Home Loan Balance Transfer involves the process of transferring an existing Home Loan to another lender. Usually, customers do this if the new lender has a lower rate of interest and other assorted benefits, like better services, a better mode of repayment and other facilities like a top up loan.
Why should you opt for a home loan balance transfer?
However, it is advisable to remember that in order to do a balance transfer, the total unpaid principal amount of loan has to be transferred. The lender that sanctioned the loan in the first place is provided the total unpaid amount, after which you’ll pay your EMIs at the new interest rate to the new lender, where you have transferred the loan. This process entails a few charges, but on the whole, if you’ve managed to pay your EMIs on time for the first year of your home loan, you can easily avail a Home Loan Balance Transfer from any lender across the country.
What are the eligibility criteria and documents required for a Home Loan Balance Transfer or Refinance?
The eligibility criteria for a home loan balance transfer are similar to the eligibility criteria for regular home loans. Although these criteria vary from one lender to another, most lenders take into account the applicant’s age, qualifications, monthly net income, number of dependents, credit (CIBIL) score, and existing debt.
The documents required for this process include proof of address, identity proof, photographs, proof of income, and latest bank statements. Additionally, you will have to provide documents related to the purchase of your home. These will include the NOC (No Objection Certificate) from your existing lender and documents that prove the ownership of the property for which you are taking the loan.
At the beginning of your application, you have to submit a letter to your current lender, requesting a balance transfer for your home loan. You will then get a letter of consent, a foreclosure letter, an NOC (no objection certificate), a loan statement displaying your EMI repayment track record, and a list of property documents. All of these have to be provided to your new lender, along with your personal identification documents.
You can use this handy eligibility calculator for home loan balance transfer, to plan your next steps better.
What are the benefits of a Home Loan Balance Transfer or Refinance?
A home loan balance transfer offers important advantages for a borrower, some of which are listed below:
- Lower EMIs
- Attractive interest rates
- Customized repayment options
- No hidden charges
- Online account access
- Customized insurance schemes
- 3 EMI holiday
- Nil foreclosure charges
- Nil part prepayment charges
Can you transfer a home loan to another financial institution?
Yes, it is possible to transfer your existing home loan to another financial institution. Usually, people want to transfer home loans when they find that they are paying a higher rate of interest, when compared to market rates. This takeover of home loans forms the core of a home loan balance transfer. Basically, it involves transferring your unpaid principal amount from one lender to another at a lower rate of interest.
This process is a great way to reduce your debt in case you find that your present home loan is proving too costly. You can try using the Bajaj Finserv Home Loan Balance Transfer EMI calculator to work out your savings in accordance with the lower interest rate here.
Charges involved in a Home Loan Balance Transfer or Refinance
As with all financial transactions, there are certain fees and charges involved in carrying out a home loan balance transfer or refinance. They are:
- 8% processing fees
- 1000 for EMI bounce charges
- 2% penal interest per month
- 4% plus applicable taxes for foreclosure
- 2% plus applicable charges for part prepayment
- Nil loan, interest, and principal statement charges
Depending on the type of home loan balance transfer you choose, you can also benefit from nil foreclosure and part prepayment charges!
How to apply for a Home Loan Balance Transfer or Refinancing
The first step is to calculate your savings on a Home Loan Balance Transfer EMI calculator, which is easily available online. If you want, you can also choose a Top Up loan. This is a new loan which is offered over and above your home loan at a low interest and a long tenor. It can be used by you to pay for renovating your home or adding a new wing to it or for any other purpose of your choosing.
Following this, just fill out the online balance transfer form:
- Enter your personal details
- Enter your financial details
- Enter your employment details
- Enter your existing property details
- Review your loan offer
- Submit your property details
- Pay the secure fee for online transactions
- Submit all of your relevant documents
But remember, don’t shift your home loan just because the new lender offers a lower rate of interest. It is important to carry out a cost benefit analysis. Your entire transfer depends on numerous factors—such as the difference in interest rates, the amount of unpaid loans, and the tenor. An example of a situation in which transferring your loan isn’t ideal is if you have very little amount of unpaid loan remaining, which results in negligible benefits at best. The processing fees you have to pay initially is not worth it if you’ve almost repaid with your loan.
Therefore, a balance transfer works best if you have recently started paying back your loan. There is also a possibility of your request for transfer to be rejected. That is why it is important to consider whether the process justifies any savings you may gain.
What are the guidelines involved in a Home Loan Balance Transfer or Refinance?
According to the RBI, a home loan balance transfer policy contains information on balance transfer charges that you will have to take into account before transferring your home loan. It has directed financial institutions to refrain from levying foreclosure fees with regard to floating interest rate home loans. Previously, lenders would levy a prepayment penalty ranging between 2-5% of the outstanding principal at the time of refinancing the home loan. Under the new guidelines, however, individual borrowers of floating interest home loans are exempt from these penalty charges. Remember, though, that the charges remain in place for individual borrowers of fixed interest home loans, and all non-individual borrowers.
Also, even if you are exempt from penalty charges, you still have to pay a processing fee to your new lender which could ranges between 0.5% to 1% of the loan amount. This amount is sometimes restricted by many lenders to Rs.5,000.
What is a Top Up Loan? How does it work?
Purchasing a home comes with many uncalculated expenses that are difficult to predict. That’s where top up Loans come in. Ideally, it comes low interest rates and a hassle-free application process. Bajaj Finserv’s Top Up Loans are a unique benefit offered to their existing home loan balance transfer customers. If you have transferred your home loan balance to Bajaj Finserv, you will be eligible to apply for a top-up loan after one year.
How do you get a Top Up loan?
It’s fairly simple to avail a top up loan, since financial institutions consider it as an additional loan on the basis of an existing one. This simplifies the documentation process greatly and cuts down the approval time and any other additional delays associated with the loan application process.
Top up loans can be availed through both the online and offline methods:
- Online: Fill the online application formand review your loan offer.
- Offline: call on 1-800-209-4151 or visit any of the financial institution’s branches.
What are the benefits of a Top Up Loan?
A top up loan is a unique option for Home Loan Balance Transfer customers that gives them the freedom to borrow money over and above the initial home loan amount.
To apply for and maintain multiple loans is quite a hassle. Also, if you’ve bought land, you’ll probably need to get a Home Construction Loan to fund your construction processes. A top up Loan on your existing loan will hasten the activity and save you lots of time and unnecessary effort. Using a Top Up loan for home improvement also gets you tax exemption on the loan amount.
Additionally, these loans can be used for a variety of other purposes like marriage expenses or even education. Remember that you can make use of this facility a year after your loan gets disbursed. Here are some of its prime benefits:
- Fast & convenient
A top up loan can be approved very quickly, and provides a high amount to fulfil any and all of your needs.
- Lower interest rate and lower EMI
Since a top up loan is provided on top of an existing loan, it proves that your lender trusts in your repayment capabilities. That is why it comes with a lower interest rate, and consequently, lower EMIs.
- A convenient and long tenor
The top up loan usually has the same length of repayment as the time you have left to pay off your home loan. A long tenor means your EMI amounts are likely to be less, because they are spread across a longer term. This makes it comfortable for you to make timely payments without stress.
What is the purpose of Top Up and Balance Transfer of Home Loans?
In the end, a home loan balance transfer is not just about saving money, it also allows you to make use of the same for investing in numerous other options. Having a home loan and owning a house is hardly the end of your journey—there are a lot of other assets you can acquire and financial investments you could make for your future security.
A Home Loan Balance Transfer from Bajaj Finserv will undoubtedly give you better offers and services such as a low interest of 8.85% and features like a 3 EMI holiday.