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Understanding Home Loan Balance Transfer or Loan Transfer
A home loan balance transfer is also known as refinancing or simply as balance transfer. It is an option that a lot of people opt for, to avail lower interest rates on home loans available to them. You cannot avail the benefits of a reducing interest rate in the market if you have opted for a fixed rate of interest. You could try discussing it with your bank to reduce the interest rate you are paying, citing a good repayment record. However, if your bank is not amenable, you can consider shifting your loan to a different institution.
The Process of the Transfer
First things first, you will have to submit a letter to your existing lender to request a transfer. The lender will then have to provide you with an NOC or consent letter, as well as a statement that mentions the outstanding balance.
After that, these documents will have to be submitted to the new lender, who will transfer funds to your present lender for closing your account. The old lender will hand over your property documents to the new one, and the post-dated cheques you might have submitted will be cancelled.
If you are applying for a balance transfer, you will be required to go through the entire procedure of applying for a home loan all over again, with the new lender. This procedure may include a property document verification, credit appraisal, technical evaluation, and so on. Once these verifications are done, the new bank will approve the loan.
Taking the Other Charges into Account
Balance Transfer involves prepayment of the loan with your current bank. The bank may charge you a prepayment penalty for the same. While many banks are these days waiving off this penalty, you still need to discuss it with your lender. Then, there is the processing fee that you might have to pay the new lender.
When you are comparing lenders, don’t forget to take these charges into account as well.
Why Opt For Balance Transfer
Apart from the fact that you are saving on interest, there are a few other reasons why you should consider switching to another bank for your home loan. Some of these reasons are:
Your current lender is not open to negotiation: It might be possible that you wish to re-negotiate some terms with your bank, like extending your loan tenure to lower the EMI. In case your bank is not open to re-negotiation of any terms, you can consider opting for home loan balance transfer.
Lack of top-ups: Sometimes, the anticipated costs involved in buying property go up significantly. If something like this happens, you might want to top-up your loan to be able to renovate your home or meet other needs. If your lender doesn’t offer top-ups, you can consider switching lenders.
Issues with the services: Something as simple as being dissatisfied with the services provided by your bank is also a good enough reason to switch.
Things to Consider
If you are considering home loan balance transfer, here are some things that you should keep in mind:
If you can, always switch early on during the tenure. This would mean that you are able to save more.
Get acknowledgements from your lender for the documents that are to be sent across.
Remember, a loan switch may not be possible if you have an irregular history of loan repayments.
Home loan balance transfer offers numerous benefits to borrower, but this decision should be taken only after due consideration of all the aspects pertaining to the loan. Therefore, do your due diligence before you go for it.