All you need to know about a home loan balance transfer

Imagine that you have recently settled into your own house and have begun making monthly payments towards your loan. While the terms and conditions of your loan seemed feasible earlier, you realize that you aren’t happy with your home loan’s features any longer. You have identified another home loan with a better interest rate and more benefits. In such a case, there is a solution for you in the form of a home loan balance transfer.

How does a home loan balance transfer work?

There are some specific steps that you must take to start with the home loan balance transfer:

1. You will first need to submit a letter to your existing lender requesting a balance transfer.

2. They will issue a letter of consent, a no-objection certificate (NOC), a foreclosure letter, a list of property documents (LOD), and a loan statement that shows your EMI payment history.

3. After that, you have to apply to the new lender and submit all the needed documents when applying for a new loan.

• Submit the application form, along with your photograph.
• Submit identity proof, date of birth proof, address proof, and signature proof.
• Next, submit documents that prove the ownership of the property for which you are taking the loan.
• You will also have to submit a NOC from your builder/ society, along with the documents procured from the first lender.
• Next, your new lender will ask you for proof of income. You will have to show them your salary slips for the last three months and your IT returns/ Form 16 for the previous two years.
• Furthermore, business continuity proofs like an appointment letter will be required.
• Finally, bank statements for the last three months will also have to be submitted.

4. The new lending institution will verify all documents, look at your financial history, and evaluate your eligibility to transfer the home loan balance.

5. The new lender will hand over a cheque of the principal balance amount to the old lender if the loan is granted. The latter will then transfer all your loan papers to the new firm.

6. Finally, post-dated cheques that lie with the old financial institution will be cancelled.

7. The transfer process is then complete.

Charges associated with a home loan balance transfer

Apart from the procedure, familiarise yourself with the charges that you have to pay when opting for a home loan balance transfer.

It is essential to check with your bank about their policy regarding a home loan transfer before proceeding. If a large penalty payment is at stake, staying with your original lender might be wiser. Your new lender would charge a processing fee, around 0.5-1.0% of the loan amount.

Each financial institution has its own set of regulations to transfer home loan balance to be considered. It is necessary to enquire about these rules to determine whether the benefits of moving your home loan outweigh the drawbacks.

Additionally, any financial institution will want to evaluate your credit score, obtain legal verification of your property documents, and complete other procedures. Once these items have been reviewed, your balance transfer application will be approved.