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As a homeowner, one of the biggest financial commitments you make is taking out a home loan. However, after a few years, you may find that your current home loan is not meeting your needs anymore. This is where a home loan balance transfer comes in handy. A home loan balance transfer is a process where a borrower transfers the outstanding balance of their existing home loan to a new lender who offers a lower interest rate.
In this guide, you can find information about everything you need to know about home loan balance transfer, including the process, eligibility, benefits, and documents required.
Related read: Difference Between Secured and Unsecured Personal Loans
Interest Rates and Charges in Home Loan Balance Transfer
One of the main advantages of a home loan balance transfer is that you can avail a lower interest rate. When you transfer your home loan to a new lender, you can negotiate for a lower interest rate. This can help you save a significant amount of money in the long run.
However, you might have to pay a small fee for the loan transfer to your existing lender. The fee differs for every lender.
Eligibility for Home Loan Balance Transfer
To be eligible for a home loan balance transfer, you must meet the following criteria:
- Good Credit Score
- Stable Income
- No payment default history
Good Credit Score
Most lenders require borrowers to have a good credit score of 750 or above to be eligible for a home loan balance transfer.
Stable Income Source
You must have a stable income source to be eligible for a home loan balance transfer. This ensures that you can repay the loan on time.
No Default History
You cannot have a default history on your existing home loan to be eligible for a home loan balance transfer.
Documents required for Home Loan Balance Transfer
You will have to gather various relevant documents for a home loan balance transfer.
First, you should collect the following documents from your existing lender:
- Formal application requesting for a letter of consent to transfer the loan
- A No Objection Certifcate from the existing lender
- Home loan Statement
- Property Documents
- Post-dated cheques
Documents you need to submit to the new lender:
- KYC documents (Aadhaar, PAN, Voter’s ID, Driving license – any one)
- Address Proof (Passport, Aadhaar, Voter’s ID, Driving license – any one)
- Financial Documents (Form 16, Latest Salary Slips, Bank Statement for last 6 months – present all)
- Property Documents (Ownership document, NOC from developer/Housing society, Registration, Stamp duty payments()
- Documents of your existing loan (Loan sanction letter or loan agreement, approvals from existing lender, home loan statement till date)
Home Loan Balance Transfer Calculation
Head online or talk to your exciting lender to calculate the exact fee and charges for a home loan balance transfer. The charges vary for every lender.
Should you apply for a home loan balance transfer?
A home loan balance transfer can be a good decision if you are looking for a lower interest rate and you are not happy with your existing lender. However, it is important to understand every aspect and take a decision accordingly.
Home Loan Balance Transfer Process
The home loan balance transfer process involves the following steps:
Step 1: Check Eligibility
Before you start the home loan balance transfer process, you need to check your eligibility. Most lenders require borrowers to have a good credit score and a stable income source.
Step 2: Choose a New Lender
Once you have checked your eligibility, you need to choose a new lender. You should research different lenders and compare their interest rates, fees, and additional features before making a decision.
Step 3: Apply for Home Loan Balance Transfer
After you have chosen a new lender, you need to apply for a home loan balance transfer. You will need to submit an application form, along with the required documents.
Step 4: Get Approval
Once you have submitted your application, the new lender will review your application and conduct a credit appraisal to determine your eligibility. If your application is approved, the new lender will sanction the loan amount and pay off the outstanding balance on your existing home loan.
Step 5: Repay the New Lender
After the new lender has paid off the outstanding balance on your existing home loan, you will need to start repaying the new lender at the agreed-upon interest rate.
Conclusion
A home loan balance transfer is an excellent way to save money on your loan and make your monthly payments more manageable. Make an informed decision and choose the best lender for your needs.
