Home loan balance transfer is when you transfer your home loan amount from the existing bank to another new bank. This is usually done to avail better service and lower interest rates from the bank which would be willing to takeover the home loan. It is also known as ‘Refinancing and Home Loan Take Over’.
Home loans usually have long tenure, and the home loan EMIs comprises almost 50% of the loan interest amount you pay to the bank during the loan tenure. The current interest rates on home loans varies from 8.40 – 12.25%.
Preferably the benefit of home loan transfer is in the initial tenure of 4 to 5 years of loan repayment as that is when you pay the highest interest component. Check for Instant Home Loan Balance Transfer online.
Benefits of Home Loan Transfer
- There can be reduction in interest rate to as low as 8.40% per annum
- Reduction in monthly EMI can be up to 5% depending upon the rate difference, EMI and balance tenure.
- You can even avail a top up loan at same rate as home loan provided you meet the eligibility criteria and loan to value ratio.
- Generally, a lower interest rates and other discounts as zero processing fee is offered by the new lender.
Basic eligibility criteria
- Age, income and employment details and loan to value ratio.
- Applicant should have an existing home loan from another lender
- Some lenders are specific that an applicant should have paid at least 6 to 12 EMI’s on existing loan before opting for balance transfer.
- There should not have been any default in EMI payments on existing loans.
- The project must be approved with the new lender in case of under construction property. If a new property’s possession has been handed over but registration has not been done, then transfer may not be possible.
- Registration should have been completed even for ready property.
Additional Reading: What is more beneficial- Home Loan Balance Transfer or Home Loan Top up
Home Loan Transfer Charges
- Charges to transfer your home loan depends on your current bank, the new bank and also on the state of transfer. Standard charges include foreclosure charges to be paid to your current bank, processing fees, title deed charges and other incidental charges.
- Foreclosure charges are to be paid to the current bank for take over of fixed rate home loans, whereas there are no fees for foreclose of floating rate home loans.
- Processing fees on transfer may range from a flat fee of up to 1% of the loan amount, though sometimes banks offer discounts and attractive offers.
Availing the best home loan transfer
- Check interest rate track record of the new lender
You must check that the lower interest rate being advertised by the new lender is real and not a shot term gimmick.
- Examine the service quality of the new lender. Lower rate shouldn’t come at the price of inferior service.
- Check the benchmark rate
Usually two benchmark rates are used for home loans – Marginal Cost of Funds based Lending Rate (MCLR) used by banks and Prime Lending Rate (PLR) of housing finance companies. As MCLR benchmarked loans are supposed to be more transparent, they are preferred over PLR benchmarked loans.
- Calculate the transaction cost, these include processing fees, stamp duty (in some states) and documentation charges.
- Some banks insist on a prior notice to prepay your home loan. Examine the loan agreement carefully and ensure that due notice is given to or waived by your existing bank.
- Select the appropriate time for the loan transfer.
As the process of loan transfer usually takes 10-15 days from the date of application and your current bank may take another 10-20 days to handover the property documents to the new bank. During this period, you will not be able to avail further loan disbursements. So time the transfer of your loan when you don’t expect any fresh demand from the builder for a month or so.