Because home loans have the longest terms, you are required to repay them over a long period of time. You have to devote a significant portion of your income to them. Therefore, while choosing a home, the interest rates associated with it are most important. This is also the case because the interest portion of a home loan EMI makes up more than half of the total payment. When you determine the interest rate for the entire term, you will find that the interest component is almost identical to the principal component.

Many people who have previously bought a property with a home loan may believe that they made a mistake. Because their home loan was authorized at rates that were significantly higher than they are now. The good news is that they are still qualified to take advantage of the low-interest rate offers. This can be done by transferring the remainder of their current home loan.

What is a home loan balance transfer?

A home loan balance transfer (BT) facility offered by financial institutions. As the name implies, this essentially enables a borrower to move their current loan obligations from one lender to another. A borrower typically chooses a home loan balance transfer option when another lender is providing them with a better rate of interest.

In some cases, if the borrower chooses to pay off their whole loan amount before the payback period is over, the lending institution will impose a penalty fee on them. On the other side, certain other lending institutions have a tendency to not impose any kind of penalty. The same may encourage some people to transfer their Home Loan repayment obligations to a different financial institution.

Documents for a home loan balance transfer

Consent letter: Your point of contact at the bank where you obtained your home loan will need to receive a formal application letter from you. This informing them that you are thinking about transferring your home loan and that you require a letter of approval from them.

NOC: Second, a No Objection Certificate in your name must be issued by your current lender. This should state that your existing lender has given permission for your outstanding housing loan debt to be transferred to the new lender.

Loan agreement: You must have a loan agreement. This is commonly referred to as a sanction letter. In order for the Home Loan balance transfer process to be completed.

Foreclosure letter: The letter’s title implies that it informs your present lender that your housing loan has been foreclosed as of the date specified on the document. And that there is no outstanding balance. Once the principal balance of the outstanding home loan is paid in full to the previous lender by the new lender, it is released.

Home loan statement: This effectively brings the details of the Housing Loan to the frontline. This includes the history of EMI repayment and previous performance. The amount of the outstanding housing loan is also highlighted.

Property documents: You will need to provide all relevant documentation if you want to turn the same into one of the Balance Transfer loans of one of our lending partners.

Eligibility criteria

There are eligibility requirements like the normal home loan eligibility. Here are the eligibility criteria for housing loan balance transfer.

You must already have a home loan from another lender.
Before choosing a balance transfer, a borrower may also need to have completed at least 12 EMIs on an existing loan. And the lock-in period, according to some lenders. This requirement changes depending on the lender.
The applicant shouldn’t have missed an EMI payment on any of the previous loans.
The possession has been transferred but registration has not yet been completed. Most lenders do not allow balance transfers of house loans for properties during this situations.

Checking the overall cost of the transfer

There are a number of expenses associated with transferring your housing loan. This includes processing fees, application fees, prepayment penalties, and transfer fees in some lenders’ cases. Therefore, it’s crucial to calculate and analyze how much you can save after moving your loan before making a decision. The lower interest rate may be alluring and tempting. But it’s crucial to consider whether or not it will be advantageous for you in terms of money saved. Calculate each scenario’s total borrowing costs, taking into account prepayment penalties and additional processing fees. Only choose the transfer if you would still save a sizable sum after paying all the fees.