Home loan balance transfer is an excellent facility which can benefit borrowers in two ways. The system enables an individual to transfer the unpaid amount of a home loan to a new lending institution to extend their repayment tenor, get lower the rate of interest, or for other reasons.
With this, borrowers can reduce the overall burden of interest charged by the current lender and help them repay the credit amount more conveniently. This article will help borrowers learn about home loan transfer charges and the significance of home loan balance transfer.
What are the charges involved in a home loan transfer?
There are several fees and charges an individual has to bear while planning to avail a home loan balance transfer. Following are the common charges involved:
- Processing charges
A small proportion of the credit amount is levied as a processing fee by the new lending authority.
- Home loan transfer charges with EMI
While applying for a home loan balance transfer facility, an individual has to pay the home loan transfer charges in case there is a delay in the repayment of equated monthly instalments (EMIs).
- Incidental charges
Incidental charges are those that are used to cover the costs, fees, and expenditures associated with the recovery of undue payments from a defaulting consumer.
- Charges on account of an external opinion
This charge is applicable when a person gets external advice from an attorney and pays the professional fees directly.
- Statutory charges
Statutory charges are collected by the lending institution on behalf of statutory bodies during the process of getting a housing loan. All statutory charges must be paid by the borrower.
- Foreclosure charges
In case of home loans with fixed interest rates, the charges on home loan balance transfer can be between 1% and 3%.
After knowing about the fees and charges involved in home loan transfer, here is a look at the advantages of home loan balance transfer.
What are the benefits of home loan balance transfer?
Following are some of the notable advantages of a home loan balance transfer:
- Lesser interest rates
When it comes to housing loan balance transfer, the key reason that encourages borrowers to opt for it is its low-interest rates that reduce the repayment burden. Thus, it helps an individual if he/she is not satisfied with the current lender’s service or wants to save funds on interest. If required, individuals can use the home loan interest calculator to verify the interest rate and choose the best one.
- Higher top-up value
New lenders may provide higher home loan top-up value than the previous lender since the interest of the loan will be repaid faster. Hence, it will help in getting better top-up value on housing loans.
- Pre-payment facilities
There is an incorrect opinion among people that availing home loan balance transfer negates the opportunity of making prepayments. However, many lenders today provide consumers this facility to attract them to make prepayments and reduce their credit burden.
- Better credit score
If used correctly, home loan balance transfer can help boost an individual’s credit score apart from debt consolidation and management. Having a healthy credit score can bring attractive credit deals and reasonable interest rates.
- Tenor flexibility
Another benefit of a home loan balance transfer is that it provides tenor flexibility. Borrowers having a good record of making repayments on time can negotiate with the new lender to either extend or shorten the repayment tenor as per their financial capacity.
There are many reputed lenders that provide customised pre-approved credit offers to their existing borrowers. These offers are available on various secured financial products like home loans, property loans, etc. and unsecured financial products like business loans, personal loans, etc. Existing consumers can verify their pre-approved offers by providing their name and contact details.
Now, if an individual is planning to opt for a home loan balance transfer, he/she needs to fulfil the eligibility criteria in the first place.
Eligibility criteria for home loan balance transfer
Mentioned below are the eligibility criteria that an individual has to meet while opting for a home loan balance transfer:
- An applicant must have Indian citizenship
- The borrower must have paid a minimum of 12 EMIs beforehand
- Age of the applicant must be between 23 years and 65 years
- The person should have at least 3 years of experience in a reputed organisation
- The applicant should retain a credit score of 700 or above
- Minimum income of the individual must be Rs.25000
- Minimum property value of the applicant must be Rs.20 lakhs
After fulfilling the eligibility parameters, applicants should gather the necessary documents on time.
Documents required for home loan balance transfer
Following are the documents that a person should furnish while opting for a home loan balance transfer:
- Identity proof (PAN card, Aadhaar card, driving licence)
- Address proof (Aadhaar card, electricity bill, rental agreement)
- Income proof (bank account statements for the last 6 months, Income Tax Returns, last three months’ salary slips, profit and loss account, balance sheet)
- Property papers (NOC from society or builder, registered agreement for sale, occupancy certificate, property tax receipt)
- No Objection Certificate from the existing lender
- Other details related to the prevailing home loan
Once an individual has met the eligibility criteria and gathered the necessary documents, he/she can apply for the home loan balance transfer.
Steps to apply for a home loan balance transfer
Mentioned below is the step-by-step process to apply for a home loan balance transfer online:
Step 1: Navigate to the official portal of the preferred lender
Step 2: After this, borrowers should provide their personal, financial, and employment information
Step 3: Then, applicants have to enter their desired loan amount and repayment tenor
Step 4: Crosscheck all the information and click on ‘Submit’
Upon completing all these steps, the application request for a home loan balance transfer will be submitted successfully.
Knowing about the home loan transfer charges beforehand can help an individual when he/she opts for a home loan balance transfer. Even though it has become an excellent borrowing option these days, its terms and conditions differ considerably from one lender to another. So, applicants should conduct thorough research before finalising their decision.