Home loan balance transfer, also known as home loan refinancing, is a facility that individuals repaying a home loan can use to switch lenders and transfer the pending balance on their home loan to another lender willing to refinance the loan on terms and conditions that the borrower finds desirable.
The balance transfer process involves one’s new lender repaying their current lender the pending loan amount. Once this is done and you receive all the original property papers you had submitted to your current lender along with the home loan NOC is the home loan balance transfer considered complete.
If you are planning to avail of the home loan balance transfer facility, here are a few things you must know beforehand.
- If you are an individual borrower with a floating interest rate home loan know that keeping in line with the Reserve Bank of India’s rules and regulations pertaining to home loans and their prepayment, your current lender won’t be able to charge you any foreclosure penalty.
However, the new lender you apply to will treat your home loan balance transfer application as a new home loan application and therefore, charge a processing fee. Over and above this, depending on the lender you choose to go with, you may even be asked to pay application and administration charges.
Therefore, before applying for a home loan balance transfer, you must make an effort to renegotiate the terms and conditions of your housing loan with your current lender. If you have been an ideal customer with a clean repayment track record and have had a loyal and fruitful relationship with your current lender, chances are they will be ready to negotiate. - A home loan balance transfer calculator is an online tool that lets borrowers calculate the home loan amount they are eligible for. These calculators are free to use. Using these calculators, individuals planning to apply for a home loan balance transfer can calculate their new EMIs as well as the total interest they will save by opting for a home loan balance transfer.
Those planning to avail of this facility must use the home loan balance transfer calculator to do a cost-benefit analysis. If the cost of transferring your loan is higher than the money you will save through the transfer itself, it would make more sense to stick to your current lender, until of course their sub-standard service is the prime reason you decided to switch lenders in the first place. - When opting for a home loan balance transfer, make sure to opt for a Repo Rate-linked home loan. The Reserve Bank of India changes the Repo Rate in line with the economic conditions prevalent within the Indian economy. The benefit of Repo Rate-linked home loans is that transparency is much higher in the case of these loans.
Since the RBI publishes all changes it makes in the Repo Rate on its website, home loan borrowers can easily keep track of these changes. - Those planning to apply for a home loan balance transfer should first inform their current lender of their plans to do so. It is only after they get a nod and the home loan NOC along with a copy of all the documents they had submitted at the time of applying for the loan as well as a copy of their repayment track record can a home loan borrower apply to another lender for home loan refinancing.
- Before you sign the home loan offer letter sanctioned by your new lender, make sure to go through all the terms and conditions carefully. You can consider hiring the services of a legal expert if there is any financial jargon or any particular terms and conditions that are beyond your understanding.
The home loan balance transfer facility is a highly beneficial option available to home loan borrowers. However, one must avail of this option only after carefully weighing the pros and cons. More importantly, if one is transferring their home loan to another lender, primarily to benefit from lower interest rates, choosing the right time for the balance transfer is essential. What is also essential is ensuring that there is a difference between the old and new home loan interest rates.