Home Loan Balance Transfer: All You Need to Know

So, you have bought your dream home availing a Home Loan after several years of saving for the down payment. You were happy with the complete deal. It has been three years and the high Home Loan EMIs are burning a hole in your pocket.

Meanwhile, with interest rates going down, you find a difference of nearly 1% on your loan. With another 12 years remaining for the loan tenure to complete, you wish that the present rate of interest is applicable on your Home Loan too.

So, you meet your bank’s officials with a request for a lower interest rate. But your request is turned down though you have a good CIBIL score. What will you do in such a situation? Well, you may consider opting for Home Loan Balance Transfer. Almost every bank provides this facility.

But before you make that final move, here is everything you should know about this facility:

What is Home Loan Balance Transfer?

It is the process of transferring an existing Home Loan to another bank or NBFC (Non-Banking Financial Company) that provides better services and lower interest rates.

The entire unpaid principal loan amount gets transferred to the chosen bank. All that the borrower needs to do is to apply for it using the related application form.

Factors to Consider

When transferring your loan, you should consider several other factors. Not hurrying up and considering all factors involved will help you make an informed decision.

• Slashed interest rates are sometimes a publicity or advertisement gimmick to attract new customers. Ensure that your new lender has good market credibility.
• Check if the new bank levies prepayment charges for transferring of your loan balance and if it does, how much you are saving on transferring your loan?
• Calculating the costs involved for loan transfer will give you an idea about the extra charges and hidden costs if any. This may include stamp duty, processing fee, pre-closure charges by the current bank, etc.
• Ensure that the lower interest rates offered by your new lender are not for a limited period otherwise you will end up paying the standard interest rate.
• Reading the fine print will help you not regret later. Read all the terms and conditions so that you know if there are hidden clauses.
• Do double check to know if your new bank offers good quality services. You will certainly not want to face hassles later!

The biggest advantage of a Home Loan Balance Transfer is saving money. Are you eligible for this facility?

If you are aged between 21 to 65 years with a clear history of 12-24 months of timely payments on your existing Home Loan (depending on lender’s policy), and a stable employment history with at least a year of service with your present employer, you are eligible to Avail Home Loan Balance Transfer. Some banks may consider your gross family income, minimum CIBIL score, and clear credit history.

Documentation

Your Home Loan Balance Transfer application may be considered similar to a new Home Loan application. The following documents should be kept handy:

• Duly filled application form along with the passport size photographs signed across
• Identity proof – Aadhar Card, PAN Card, Voter ID, (any one)
• Residential address proof
• Age Proof (10th or 12th Mark Sheets, PAN Card, Voter ID etc.)
• Official Address (Any one of rent agreement, utility bills, lease etc) for Self- Employed professionals and Self-Employed Business Men
• Proof of income

Salaried Employees: Bank Statement of last 6 months, Salary Slips for last 3 months, Form-16

Self-Employed Professionals and Business People: ITR of last 3 years, Bank Statement of last 1 year, Profit & Loss Statement and Balance Sheet audited by Chartered Accountant, Auditing Reports and other financial documents (if applicable)

• Copy of loan statement
• Bank Statement of last 1 year from which the Home Loan EMIs have been deducted
• Complete property documents that are in the possession of the current financial institution
• Bank statements showing EMI deductions of existing home loan
• Form-16 documents for the last three years
• Salary slips of the last six months.

*The list of documents mentioned above may vary from lender to lender as per their policy

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