Sorry, you need to enable JavaScript to visit this website.
  • Muthoot Finance Logo
Quick Link

| September 10, 2020

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

STEP 1

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.

STEP 2

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.

Suggested Read: All you need to know about Home Loan Balance Transfer

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.

Enquire Now!

CATEGORIES

OUR SERVICES

RECENT POSTS

FIN SHORTS

FAQs

Can I get a top-up loan with a balance transfer?

Yes, you can get a top-up loan with a balance transfer if you opt for a new lender. Some lenders provide both facilities, so you can transfer your existing loan to a lower interest rate. You have to follow the transfer process correctly with all the necessary documents, like the NOC or consent letter. Remember, a loan switch is only possible if you have a good history of loan repayments.

What documents are required for a home loan balance transfer?

Different lenders require different documents for a home loan balance transfer. You have to check the list of required documents with the lender or NBFC for the balance loan transfer. Proof of income, property-related documents, KYC, NOC or consent letter, loan statements and documents held by the lender are the main documents that any NBFC will require to start the balance transfer process.

Does a balance transfer affect your CIBIL score?

Balance transfers won’t directly impact your credit scores, but applying for a new card can. This results in a hard inquiry, which may temporarily lower your score. Additionally, a new account reduces the average age of your credit history, potentially leading to further score reductions.

What is the penalty for a balance transfer?

A Balance Transfer involves paying off your existing loan with your current bank. Keep in mind that your bank might impose a prepayment penalty for the same. While many banks are now waiving this fee, it's important to clarify this with your lender. Additionally, the new lender may charge a processing fee that you'll need to consider. When you're comparing lenders, make sure to compare these costs.

Subscribe to our newsletter

help us serve you better

Close Icon