All You Need To Know About Home Loan Balance Transfer
A home loan balance transfer, also known as home loan refinancing, is the process of transferring the balance of your existing home loan to a new lender (and thus, a new loan). Home loan borrowers opt for home loan balance transfer for several reasons, including availing a better interest rate, changing the tenure of their loan, or for getting better customer service. Below, we elucidate everything there is to know about home loan balance transfer.
Benefits of Home Loan Balance Transfer
There are many reasons why one can refinance their home loan. These include:
Better interest rate
One of the major reasons why people opt for a home loan balance transfer is to save on the interest amount. If you have an existing loan and the market interest rates drop, your lender might not reduce the interest rate as much as other lenders. In this case, you can opt for a home loan balancer transfer and choose a lender who’s offering a lower home loan interest rate. This way, you can save on your interest payments in the long run. You can use various online home loan balance transfer calculators to calculate the savings on transferring your existing loan to a new lender, such as Bajaj Housing Finance Limited (BHFL).
Change the tenure of your loan
The tenure of a home loan is fixed at the time of sanction. However, you might want to increase the tenure and lower the EMI amount if you find yourself unable to pay your EMIs. On the other hand, you might want to reduce the tenure if you’re in a position to pay off your loan faster. In either of these cases, a home loan balance transfer is a good option. Moreover, a home loan balance transfer is also useful if you require additional funds on your home loan. In this case, you can opt for a top-up on your home loan.
Avail better deals and service
There are other factors pertaining to your home loan that you might want to change. These include lower penalties, foreclosure fees, switching between fixed and floating interest rates and better customer service. If your existing lender doesn’t satisfy you in terms of any of these factors, you can switch to another lender who offers favourable terms and conditions.
Eligibility Criteria For Home Loan Balance Transfer
While the eligibility criteria for home loan balance transfer might differ from lender to lender, the usual eligibility criteria are mentioned below.
Type of employment: Salaried, professionals and self-employed individuals with Income Tax Returns.
Age: 21 – 65 years
Owned property: Ready to occupy or already occupied.
Existing loan: At least 12 EMIs paid and no outstanding dues.
Documents Required for a Home Loan Balance Transfer
Depending on your type of employment (salaried or self-employed), you might be required to furnish the following documents:
- Latest salary slips or Form 16
- Bank account statements of the last 6 months
- Income Tax Returns of the previous year
- Balance sheet and profit & loss account of the previous year
- Registration certificate of the business
Other than the above-mentioned documents, your new lender would need the following:
- Identity proof (Aadhaar Card, Driving License, Passport, PAN Card etc.)
- Address proof (Aadhaar Card, Driving License, Passport, PAN Card, utility bills, NREGA card etc.)
- Relevant property documents from your existing home loan lender
- Documents related to the current loan
- Bank statement showing EMI payments from the last 12 months
- Letter of approval or NOC from the existing lender
Things You Should Consider When Transferring Your Home Loan
There are certain costs that you have to incur when you refinance your loan. These include documentation charges, valuation fee, stamp paper fees, legal charges, processing fee and other charges pertaining to loan transfer. Hence, it’s important to analyse if the value you derive outweighs the costs of refinancing your loan. If not, it does not make sense to go through the hassle of the process.
At times, home loan borrowers can get lured by lenders offering lucrative fixed home loan interest rates and transfer their loan to a new lender. Oftentimes, these are just marketing gimmicks wherein the lender changes the rate to floating interest after a short period of time. In such a case, the borrower ends up paying higher interest rates, rendering the home loan balance transfer useless.
Terms and Conditions
It is imperative that you carefully analyse the terms and conditions of your new home loan. While it might offer a lower interest rate on the surface, there could be other factors such as hidden costs masked in the details. Thus, ensure that you’re fully aware of the fine print before opting for a home loan balance transfer.
A home loan balance transfer can offer various benefits such as lower interest rates, adjustment of loan tenure, better services and the option to switch between different interest rates. It is important to know the eligibility criteria and documents required for the new loan before applying for a balance transfer. Lastly, one must carefully understand the cost-to-benefit ratio, terms and conditions and read the fine print of a new home loan before opting for a home loan balance transfer.