Home loan balance transfer or home loan transfer is the process of transferring an existing home loan from one lender to another. In this case, the primary lender is credited with the remainder loan amount from the new lender, and the borrower starts repaying their debt to the new lender. The primary reason to opt for this process is to avail attractive interest rates and subsequently save substantially on the entire loan amount.
There are numerous factors which an individual should consider before going forward with a housing loan balance transfer. Make note of these pointers before you go ahead with such a procedure yourself –
- Interest rate
The primary reason to opt for a home loan balance transfer is the competitive interest rates available in the market. Thus, borrowers should compare interest rates provided by different lenders before opting for this transfer.
Borrowers can switch between fixed and floating interest rates also. For example, if a borrower has availed the loan at a fixed interest rate and finds more affordable interest rates available as floating rates, he/she can opt to go ahead with a home loan transfer to the lender offering the reduced rates.
- Research well before selecting the new lender
Borrowers planning to opt for a new lender or looking to transfer their existing home loan should perform thorough market research. Consider the market reputation, customer service, loan disbursement process, etc. of the new lender before moving forward. This market research will help them to gather knowledge on everything they need to know about a home loan balance transfer.
- Additional charges
Financial institutions levy charges on home loan transfer. Thus, borrowers should take into consideration the additional charges they are liable to pay for this loan balance transfer before applying for one.
- Additional eligibility criteria
Lenders often have specific eligibility criteria for a home loan balance transfer. For example, a lender may evaluate an applicant’s current CIBIL score, check if there is any default in EMI repayments till now, current LTV ratio, etc. before approving the loan transfer.
- Plan your transfer correctly
Last but not least, during this loan balance transfer period, borrowers will not be credited with any further disbursement; thus they should check beforehand if they have any new financial requirement during this period or not. It is one of the major things to keep track of when a borrower does a home loan balance transfer.
- For salaried individuals, they have to submit their latest salary slips or Form 16. Additionally, they have to provide their bank account statement for the last 6 months.
- For self-employed individuals, they have to submit their Income Tax returns of the previous year, registration certificate of their business. Additionally, they have to provide the balance sheet and profit & loss statement of the last year.
Home loan transfer is an effective solution for individuals to reduce their overall debt. However, before applying for this transfer, borrowers should compare the final cost of loan to the amount they might eventually save in the long run to check if it is a feasible decision or not.