Buying a home is a lifetime dream for many. Thankfully, banks and housing finance companies have made it incredibly easy to realise this dream by offering Home Loans at highly competitive interest rates, and simple repayment terms.
However, there are times when one is on the lookout for a better interest rate or more favourable loan terms, which is when a Home Loan Balance Transfer comes into the picture. As the name suggests, a Home Loan BT refers to the transfer of an existing Home Loan to another bank at a lower rate of interest.
Let us take a quick look at how and when does a balance transfer of your home loan is required.
Need for Home Loan Balance Transfer
Home Loans are available at competitive interest rates these days. In most cases, once you have selected your preferred bank, you will be bound to the bank for the loan repayment tenure. However, the fluctuations in the interest rates or the lack of services and facilities provided by your lender might lead you to think of alternate routes. Some of the leading factors that call for Home Loan Balance transfers are
Better Interest Rates
Most banks change their Home Loan interest rates, in a bid to attract new customers and get ahead of the competition. In case, you have a bank on your radar that is readily offering a lower interest rate, and you would want to take up that offer ,Home Loan Balance Transfer might be the perfect choice for you.
Need for Top-up
If you are faced with an urgent financial obligation, you can always place a request for a Home Loan Top Up, which is nothing but an additional loan over your Home Loan. This additional credit can be used for any purpose that you deem fit. However, if your existing bank does not offer this facility, you can opt for the balance transfer.
Desire for Better Services
If you aren’t satisfied with the services that are being offered by your existing lender and are on the lookout for more favourable loan terms, you may opt for a Home Loan Balance Transfer.
An important clause that you should consider when thinking of a home loan transfer is that there will be a charge associated to it, often levied in the form of a penalty. Then again, your new bank will levy a processing fee on loan. To avoid these additional charges, you should try to renegotiate with your existing lender for a more competitive interest rate or loan terms that best suit your needs.
If however, that is not an option, and you do need to transfer your Home Loan, here are the steps you must adhere to-
Step 1: Analyse the Cost and Benefits of the Home Loan Transfer
Before you decide to transfer your Home Loan, the golden rule is first to analyse your situation and find out whether there are any significant benefits of the transfer. As we mentioned before, transferring your Home Loan may incur a penalty and an additional processing fee. Hence, you must weigh the benefits on the basis of the below-mentioned points-
- If you have a fixed rate of interest, your existing bank will levy a hefty prepayment penalty, thus nullifying the benefits of better interest rates. In this case, you may be better off continuing with your current loan provider.
- If you have a floating rate interest, considering a Home Loan transfer can prove to be an ideal choice, as you won’t need to pay any foreclosure penalty.
- If your Home Loan has a long repayment tenure, a transfer will prove to be largely beneficial, owing to the savings on the overall interest outgo.
Step 2: Obtain a No Objection Certificate (NOC)
In order to go ahead with the Process of a Home Loan Balance Transfer, you must first obtain the NOC from the bank. Along with this document, you will also need to obtain –
- Your payment history
- A foreclosure document
- The original property documents submitted to the bank
This step is often long and may require you to wait for at least 1 – 3 weeks, depending on the processing time your bank requires.
Step 3: Apply to the New Bank
Once you have made up your mind to transfer the loan, you will need to apply to a new bank. The new bank will ask the following documents from you –
- An NOC from your builder or housing society
- A proof of your ownership
- Proof of your income (bank statements and salary slips)
Based on the scrutiny of the above factors with your repayment history, the bank will decide the amount of your EMI and the tenure for your Home Loan.
Step 5: Document Submission
The key to a successful Home Loan transfer and getting the loan swiftly is to ensure that you submit all your documents and fill in all the forms. Once your documents are approved by both the banks, the transfer will take place in a hassle-free manner.
Step 4: Approval of Application
This is the step where your new bank will grant you the loan. It is imperative that you know that this step can take over four weeks, owing to the background checks, credit history, and credit score check and verification of documents.
In addition, the bank will also investigate the Home Loan that you had taken before and the authenticity of the ownership documents. Finally, after all the checks are in place, the bank will then sanction the loan.
Transferring your Home Loan is quite an easy process, provided you know the ins and outs of the process, and can evaluate the need for the same. Thankfully, all the leading banks of the country offer this facility, thus making it convenient for you to opt for it, as and when the need be!