If youâve been bogged down by the high interest rate at which you took your loan, lack of flexibility, and other unfriendly features of your current Home Loan, you need to take some drastic steps. Refinancing your loan, changing your lifestyle to increasing your savings, or finding a job that pays more, you have many options at your disposal.
Home Loan balance transfer process is one such alternative that lets you transfer your Home Loan to a bank or NBFC that offers better benefits.
Apart from profiting from their lower rate of interest, you also get to increase your savings. Some institutions also offer you better flexibility in EMI, allow Part Pre-payment facility at no charges and foreclosure procedures.
How You Can Go about Transferring Your Home Loan
Getting a NOC from your bank
Youâll have to submit a letter to your current lender requesting for a loan transfer. Most often, the bank might slash the interest rates to retain you as their customer while asking you to pay a one time switch fee to re-book your loan at a lower interest rate. Depending on your requirement, you can either take this offer, or insist on the transfer if you have been following up for a lower rate & your bank hasnât been responding to your requests.
The bank will give you a consent letter or a NOC thatâll state the remaining balance of your loan. You need to submit this letter to the new lender who would then sanction your loan balance to the previous bank and get an account closure letter.
Your documents would be handed over to the new lender and all your post-dated cheques/ECS would be cancelled.
The procedure of Home Loan transfer is similar to applying for a new Home Loan. In case you want a Top Up loan, you should state the same when applying for a Balance Transfer to your new lender. The lender then calculates the amount of Top Loan that it can offer to you and also the rate of interest theyâll levy.
Maintaining a good credit score is vital to getting approved for a Home Loan Balance Transfer. With a higher credit score you have better chances of getting a faster approval from your new lender.
To ensure that you have an above average credit score pay your bills on time, donât default on your EMIs, and limit your credit card usage. During the credit approval process the lender would re-evaluate your existing loan, check your credit history and employment status, and make background checks on property credentials.
This process generally takes about 3-4 weeks and may vary from bank to bank. After your credit gets approved, youâd be given a final quote on your interest rate, tenure, and other related features.
Things to Consider before You Go for a Home Loan Balance Transfer
- If your existing Home Loan is on fixed interest rate, then youâd have to pay a prepayment penalty of 2-5% of the principal amount before you transfer your loan.
- If you have a high floating interest rate, then switching to a loan with a lower interest rate would benefit you.
- Factor in additional processing fees and costs that youâd incur during the application process. This should be ideally reduced from the total savings that you would get by opting for a lower rate to arrive at your Net Savings
Some banks wonât release your documents unless they get a cheque of balance transfer from your new bank. While in some cases, the new lender wonât sanction the loan till all the documents are submitted. In such a situation you can hold a meeting between the two representatives of the banks involved. This would allow both the banks to release the documents and hand-over the cheque, and complete the transfer without any delays.
Research extensively on the internet before you zero in on any proposal. Lenders like Bajaj Finserv offer great features on their Home Loan Balance Transfer like Online Application Process, Instant Online Approval, Minimum Documentation, Additional Top 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.
Doing a comparative study of the different interest rates and features across different lenders would further help you with this.