Home Loan Balance Transfer: Benefits and Factors to Consider

Here, we will highlight everything you need to know about a home loan balance transfer facility.

Benefits of Opting for a Home Loan Balance Transfer

Here are some of the advantages of opting for a home loan balance transfer facility:

• Lower interest rates

A lower interest rate offered by a new lender is the primary reason candidates opt for a home loan balance transfer. Lower interest rates mean cheaper monthly instalments and consequently reduced total repayment amounts.

• Flexible repayment tenure

People also opt for this facility if a new lender offers flexible repayment tenure. Customers are free to choose between short and long repayment terms per their financial capabilities.

• Part-prepayment option

The part-prepayment facility allows you to repay a portion of the outstanding home loan principal. Opting for this facility either reduces the repayment tenure or the monthly EMIs. This helps you save a considerable sum on the total payable interest.

People opt for a balance transfer if a new lender offers this facility at lower charges.

• Top-up loan

In case of situations where you need additional funds to buy a new property or renovate an existing asset, a top-up loan is beneficial. Almost every financial institution offers this facility at a competitive interest rate over the ongoing house loan.

Things to Consider Before Opting for a Home Loan Balance Transfer

Applicants must consider the following pointers and weigh the options before opting for a home loan balance transfer:

• Calculating the overall savings

Consider the additional costs, such as the cost levied by the existing lender for closing the ongoing loan before the tenure, the processing fee of the new lending partner, etc. Opting for a balance transfer when the overall savings is more is the right choice.

• Ease of documentation

Further, you should also keep in mind the hassles related to documentation and processing of the home loan balance transfer. Opting for a lender offering easy balance transfer with minimal document requirements is beneficial.

• Knowing the residual existing home loan tenure

Opting for a balance transfer at the later stages of repayment tenure will not benefit a customer. Since borrowers pay most of the interest component during the early stages of the tenure, opting for a transfer at a later stage leaves little room for savings.

Further, prospective borrowers must also consider the additional costs associated with opting for a home loan balance transfer. Additional fees, such as home loan transfer processing fees, foreclosure charges, EMI bounce charges, penal interest rates and convenience charges, should be kept in mind while opting for the balance transfer option. Considering these charges will help individuals make an informed decision.

Irrespective of the reason, the balance transfer facility has become a feasible solution for borrowers who want to lower their monthly instalments and enhance the affordability of ongoing home loans.

What is the Home Loan Balance Transfer Procedure

Here are the steps involved in a home loan balance transfer:

Step 1: Firstly, compare the interest rates and other terms offered by the different lending partners.

Step 2: In case you get a better deal elsewhere and speak with your existing lender if they are willing to negotiate the loan terms.

Step 3: If not, submit a well-written letter requesting a balance transfer to your existing lending partner. Following this, they will provide you with a NOC with the outstanding loan amount.

Step 4: Make sure to collect all the documents from your existing lender or check if they transfer them to the new lending institution.

Step 5: Finally, you can start making the EMI payments for your home loan as per the terms offered by the new lender.

Features of a Home Loan Balance Transfer

Here are some of the salient features of the home loan balance transfer facility:

• Low-interest rates: The quickest and most beneficial advantage of transferring your home loan balance is the reduced interest rate you will pay, which will lower your total monthly instalment outgo.
• Flexible loan repayment tenure: You can choose a flexible repayment period of up to 360 months to repay your loan.
• Loan top-up facility: Several financial institutions offer a top-up facility with a balance transfer option. Moreover, no additional paperwork is required in order to get the extra funds.

What Are the Documents Required to Opt for a Home Loan Balance Transfer Facility?

In order to opt for a balance transfer, willing borrowers need to produce these documents:

• Self employed individuals need to produce a properly audited profit and loss statement
• Bank account statement for the last six months
• Aadhaar Card or Pan Card
• Address proof
• KYC documents
• Identity proof
• Photograph of the borrower

If you are unhappy with the terms offered by the current home loan lender, you can opt for a home loan balance transfer facility. Consider all the points mentioned above and make an informed decision as per your financial strength and goals. Furthermore, make sure to repay the monthly EMIs on time. This will help you enjoy a hassle-free borrowing experience while keeping your CIBIL score healthy.