Everything You Need to Know About Home Loan Balance Transfers

If you have already paid a few EMIs of a home loan, and there is an improvement in your credit rating, employment stability, or sources and flow of income, it is time to consider a home loan balance transfer. The primary aim of transferring your home loan to another provider is to benefit from a lower interest rate. Let us find out everything about home loan balance transfers here! You can also use Banglarbhumi, a government website, to verify the ownership records of properties in West Bengal before transferring your home loan.

Home Loan Balance Transfer Features

There are several reasons for transferring home loan balances, such as top-up loan facilities, EMI waivers, or charge reductions. Some of the other reasons are:

Lower Interest Rates

Of course, one of the core reasons for transferring your home loan is to save money by getting offers on interest rates. Even if the difference is 1%, it means the borrower will save a lot in the long run.

Better Customer Care Services

If you get better services and 24/7 availability of consumer care services, it is best to move to another home loan provider.

Longer Tenures

Home loans help you get higher loan tenures and repayment periods. This means it offers lower EMIs and enough time to repay your loan, which eventually offers peace of mind in the long run. If you have an arrangement of finances, you can opt for prepayment or foreclosure of your loans after considering the charges stipulated in the agreement.

When Should You Opt for a Balance Transfer of Home Loans?

Given below are instances when borrowers consider transferring their home loan from the existing lender to a new lender.

An increase in a credit rating is the best reason for going for a balance transfer, as there are better chances of acquiring a lower interest rate.

It is best to go for a balance transfer when the borrower is in the initial years of the existing 45 lakh home loan emi so that they attain a higher profit value in the coming years of home loan repayment

If the borrower has stability in their employment/business and multiple sources of income, they can go for a transfer of home loan, as it can get them lower charges and interest rates

Balance Transfer Home Loan Charges

There are normally two kinds of charges associated with home loan balance transfers:

Home Loan Processing Fee can range from 3-6%; however, you can get the benefit of discounted or waiver of such fees if you have a good relationship with the provider.

Foreclosure charges are zero in case of floating rates of interest and can be up to 4% in case of fixed interest rates- these, again, can be negotiated.

Home Loan Balance Transfer: What is the Procedure?

To process a home loan balance transfer, borrowers must pay a minimum of 12 EMIs on their existing home loan and clear all outstanding dues. As a borrower, you should keep your KYC documents, proof of income, and property-related documents ready and apply for a balance transfer. If you are planning to transfer your home loan soon, follow the steps below to ensure the process is seamless.

Step 1: Compare various home loan balance transfer providers and pick one that offers the least rate of interest and lowest charges.

Step 2: After selecting a plan, close the previous loan and obtain a NOC, loan repayment record, property documents, and a foreclosure letter to process the transfer.

Step 3 – Start with the balance transfer application process and acquire your loan sanction letter

Step 4: The new provider will make the final payment to the old one, after which the borrower will receive their cheques, and the ECS will be closed. This will start a new home loan with your new EMI amount.

How to Calculate the Interest Rate when Opting for a Home Loan Balance Transfer?

Let us take an example here:

Mr XYZ has an existing home loan of Rs. 30 lakhs at an interest rate of 10.5% for 25 years. His current EMI is Rs. 28325, and the total interest charges payable towards the home loan are Rs. 5497635

Now that he has got a balance transfer offer from another provider at 8%, his new EMI becomes Rs. 23154, and his total interest amount payable towards the loan is Rs. 3946346 Total savings are Rs. 1551286.

Conclusion

Transferring one’s home loan from an existing lender to a new one can be one of the smartest moves to save money in the long run. Several financial institutions offer home loan balance transfers at negligible home loan processing fees and lower interest rates. Ensure you understand all options, make prudent comparisons, and transfer your home loan to a new lender offering sufficient benefits and perks.