A Step-by-Step Guide to Home Loan Balance Transfer Application

A Home Loan Balance Transfer involves transferring the outstanding housing loan balance from an existing to a new lender.  

To put it in simple words, whether you call it switching your Home Loan, balance transfer, or simply a transfer, it is the process of a Home Loan being taken over by a new lending institution by paying off the old lender completely. Once this is done, the borrower is obligated to pay equated monthly installments (EMIs) to the new lending institution.  

This is mostly done by a borrower to take advantage of low interest rates or a loan with better terms and conditions. If you’re planning on transferring your housing loan to another lender, here’s how to go ahead with it. 

Who is Eligible?

A housing loan borrower who has paid at least 12 EMIs and has maintained a decent credit rating can get Balance Transfer offers from various housing finance lenders. The lending institution might also prescribe a minimum loan amount eligible for a Home Loan Balance Transfer.

What are the Reasons to Consider a Home Loan Balance Transfer Application?

If you are thinking about refinancing, here is a list of reasons you can base your decision upon. 

• Better interest rates: You can enjoy lower interest rates, cheaper EMIs and consequently reduced total repayments amount. 
• Flexible repayment tenor: You can opt for flexible repayment tenor offered by the new lender as per your financial capabilities. 
• Part-prepayment or foreclosure facility: You can opt for part-prepayment option that allows you to repay a portion of the outstanding home loan principal saving you a considerable amount of interest. 
• Generous Top-up loan amount: This is helpful in case you need additional funds to renovate an existing asset or even buy a new property. 

Additional Read: All You Need to Know About Home Loan Balance Transfers

Steps to Apply for Home Loan Balance Transfer Application

Here’s a step-by-step guide to apply for a Home Loan Balance Transfer application: 

Finalise New Lender

The borrower can approach financing firms or banks. A reliable track record of Home Loan repayment and a high credit score helps a borrower get a decent deal from the finance firms. 

Foreclosure of Existing Home Loan

The first thing that you need to do to apply for foreclosure is getting a statement of account and list of property documents from your existing lender. If the previous lender refuses or delays releasing the property documents, a new lender may release the payment against a letter from the previous one, having details of legal papers held by it and the number of days it might take them to release all documents, after the loan settlement. 

Make an Application

These are the steps involved in transferring the balance of a Home Loan. Make an application to the current lender to inform that you seek a balance transfer through a formal letter or a form, listing out the reasons. 

Collect Your No-objection Certificate

Your earlier Home Loan lender will touch base with you once again with a NOC or a consent letter and the new housing loan lender will need it when you file the Home Loan application

Hand over Your Documents

Get in touch with your new lender and hand over your documents. Besides submitting important documents like the NOC and the KYC documents, you may also need to submit a copy of property papers, loan balance, filled application form, and interest statements. 

Additional Read: How a Home Loan Balance Transfer Works 

Get Confirmation from the Old Lender

After submitting documents to the new Home Loan lender, await final confirmation from the old lender regarding the closure of your existing housing loan account.  

Pay the Fees or Charges Involved and Start Afresh

Sign a contract with your new Home Loan lender and pay the fees that are due. Once this is done, you can pay the next month’s EMI to the new Home Loan lender. 

Documents Required for the Transfer

According to most Home Loan lending websites, the documents mentioned below are required from your current lender: 

• List of original documents held at bank 
• Loan a/c statement for the past year  
• Sanction letter
• Interim period security  
• New loan agreement  

Once sanctioned, a fresh housing loan agreement is made between the new lender and the borrower. The new lending institution is going to issue a cheque in favor of the old lending institution equivalent to the existing Home Loan’s outstanding amount. 

Processing Charge

Examine the processing fee (which is typically up to 7% of the loan amount). If your credit score—which represents your credit history and creditworthiness—is acceptable or if they are running a special promotion for a limited time, a lender may occasionally reduce or waive the processing fee. 

How many times can you apply for Home Loan Balance Transfer?

You can opt for a Home Loan refinance process any time after the lock-in period ends for that loan. The lock-in period for a housing loan in India typically ranges from six months to a year. You can also check with the lending institution you’ve borrowed from regarding the lock-in period for the same purpose. 

Home Loan borrowers must note that the advantages of moving a Home Loan must outweigh the costs. Per financial experts, the interest rate differential should be 50 basis points between two lenders if a borrower is planning to transfer the balance. Also, consider the penalties and fees while seeking a Home Loan Balance Transfer. 

*Terms and conditions apply.