Home Loan Balance Transfer

During an ongoing home loan tenure, a borrower might find the lending terms offered by a different financial institution to be beneficial than the present one. In such a scenario, the borrower can transfer the outstanding loan amount to this second lender in order to curtail the total repayment outgo. This procedure is called a home loan balance transfer.

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Home Loan Balance Transfer Fees and Charges

Before applying for Home Loan Balance Transfer, one must take into consideration the below-mentioned Fees and Charges:

• Home Loan Transfer Processing Fees: As the name suggests, this fee is collected by the relevant financial institutions at the time of the processing of the documents for home loan. Depending on the size of the amount that is yet to be repaid, your new lender can charge anywhere between ₹8,000-₹18,000 upfront. However, it must be noted that some of the Indian banks and financial institutions do not charge a single penny for the same.
• Foreclosure charges: If a borrower wishes to repay all of his or her debt way before the end of the loan repayment tenure, depending upon the amount that is remaining, the bank may charge them a small fee in order to make up for all of the interest they could have made, had the loan repayment tenure been adhered to. Typically, the foreclosure charges do not exceed a total of 4% of the outstanding amount. Some of the banks do not even levy foreclosure charges at all, which is one of the motivations behind a borrower having their Home Loan Balance transferred.
• EMI Bounce Charges: It is possible at times that a borrower may not be able to pay a particular installment on time or the cheque through which the Home Loan EMI was being honored ends up bouncing. In such a scenario, the bank levies what is known as the EMI Bounce Charges. However, it is not a mandatory charge and some banks do not choose to add the burden of the same on the borrower.
• Penal Interest Rate: If the borrower chooses to pay the EMI of their respective home loan on a later date, the bank sometimes charges what is known as a penal interest rate instead of levying the standard EMI bounce charges. The penal interest rates charged by banks and financial institutions tend to start at 2% for every month where the EMI in question is overdue.
• Convenience Fees: At times, the lending institution levies an additional form of fee for the benefits that the borrower will receive should they have their Home Loan Balance transferred to them. This is sometimes charged in addition to the Home Loan Processing Fee or in its replacement. One must take either one of those or both the charges into consideration while thinking about having their Home Loan Balance Transfer in order to assess whether or not the switch would be a lucrative endeavor.

Home Loan Balance Transfer Eligibility Criteria

The borrower must ensure that they meet the Home Loan Balance Transfer Eligibility Criteria which is bare minimum for almost all of the lenders that have set up operations in India.

Documents Required for Home Loan Balance Transfer

In case of salaried individuals, they must furnish their latest salary slips going back at least 3 months or Form 16.

• In case of self-employed individuals, the applicant must furnish their audited profit and loss statements.

• Last 6 months bank account statements

• PAN Card/Aadhaar Card

• Address proof

• KYC Documents

• Identity Proof

• Photograph

How to Calculate EMI on Home Loan Balance Transfer?

The Home Loan Balance Transfer EMI amount that you have to pay to the new lender after having transferred your home loan depends upon the following factors:

• The outstanding principal amount of the home loan.

• The EMI that is paid to the current lender every month.

• The current outstanding tenure of the loan- number of months/years of the loan tenure remaining.

• The interest rate with the new lender.

For Example, let’s say you wish to transfer a home loan with the current outstanding principal amount of ₹30,00,000, current monthly EMI of ₹30,000 and remaining tenure of 20 years (240 months). If the new lender is offering an interest rate of 8.70% per annum, your EMI, after the balance transfer, will reduce to ₹23,079 per month, which means, you will be saving ₹6,921 every month and ₹16,37,040 in total.

How to Apply for a Home Loan Balance Transfer?

Below mentioned is the process for applying for a Home Loan Balance Transfer:

• Step 1: Provide your personal, financial and employment details.

• Step 2: Enter your required loan amount and details of the existing property.

• Step 3: You will finally get to know the loan eligibility amount.

• Step 4: Submit your property loan document.

• Step 5: Pay the secure fee online.

Home Loan Balance Transfer Features and Benefits

• Low-Interest Rates: The most immediate and obvious benefit of getting your home loan balance transferred is the lower interest rate that you will have to pay, reducing your overall monthly home loan EMI.

• Flexible Repayment Tenure: Repay your loan over a flexible repayment tenure ranging up to 360 months.

• Loan Top-Up Facility: You can avail of a top-up facility along with a balance transfer option based on eligibility. No extra documentation is needed.

Difference between Home Loan and Home loan Balance Transfer

• Home Loan: A home loan is availed to purchase a new residential property such as a house or an apartment or land. You can also apply for a home loan to construct a new house on an existing real estate. Home loans are usually secured loans and a lot of documentation is required for applying for a fresh home loan.

• Home Loan Balance Transfer: It means transferring your existing home loan from your present lender to a new lender. Usually, borrowers consider a home loan balance transfer to save their money when they are getting a better interest rate from the other lender. Once the transfer process is complete, you owe the outstanding loan amount to your new lender. Since your loan application has already been approved by your present lender, a lot less documentation is required for a home loan balance transfer.

Home Loan Balance Transfer FAQs

What is a Home Loan Balance Transfer?

Home Loan Balance Transfer essentially enables borrowers to transfer their current loan obligation from one lender to another. Ideally, borrowers opt for Home Loan Balance Transfer facilities when an additional lender enters the orbit by offering a much more competitive rate of interest to them. On top of that, they are doing so on the very same loan that the individual in question is currently repaying to the bank that they took the loan from.

How to transfer Home Loan from one bank to another?

Refinancing a Home Loan is only a good idea when an individual has made an account of all the costs involved and even then, they turn out to be lower than the costs and charges his or her current bank is levying on them. Hence, it is important to make note of all sorts of fees that are going to be attached to the actual transfer process and others that are miscellaneous in nature.

Why and when must you avail of the Home Loan Balance Transfer?

You must consider transferring your outstanding debt to some other lender if you are getting a better rate of interest on the rest of the loan amount, and/or a waiver on the penalties charged by banks if you choose to make a prepayment of the loan or the kind involved with late payment of EMIs. The benefits that you will receive depend upon the lender.

What is the maximum amount that can be transferred?

There is actually no capping as such. One can transfer the entirety of their outstanding Home Loan amount to a different lender, provided the endeavor seems to be worthwhile to them. You can learn more about the same on Bajaj Markets.

Can I avail a top-up loan at the time of balance transfer?

Yes, indeed. One can most certainly get a top-up from the very same financial institution at the time of having their balance transferred to some other lender. Interest rates on top-up on home loans, however, have historically been slightly higher than the home loan interest rate.

Can the repayment period be extended at the time of the transfer?

Yes, one can get their repayment period extended at the time of getting their outstanding home loan balance transferred to some other lender. However, one must note that at the time of loan maturity, the age of the borrower cannot exceed 62 years, if they are salaried individuals. The age for self-employed borrowers, on the other hand, cannot exceed 70 years.

Do I require a guarantor for a home loan balance transfer?

A majority of the Indian lending institutions do not ask for a guarantor while taking over an existing home loan, partially due to the fact that the formalities concerning the same may have already been taken care of by the previous lender. However, it is entirely upon the bank to decide whether the borrower must come with a guarantor at the time of them trying to avail of the Home Loan Balance Transfer facility or not.

What is the maximum tenure one can avail of for a home loan balance transfer?

When they are applying for a home loan balance transfer, borrowers can enjoy an extended period of up to 30 years.

Do I get tax benefits on a balance transfer home loan?

The leading financial institutions offer a top-up loan over and above the principal credit amount to a borrower if she or he has opted for a balance transfer. In such scenario, the borrower can claim a tax exemption on the interest he or she has paid for this top-up loan in one fiscal year.

This tax benefit is allowed by the provisions under Section 24b of Income Tax Act, which also limits the maximum amount eligible for exemption at Rs. 30000.

Are the applicable interest rates on a balance transfer loan higher than a home loan?

The interest rates on a balance transfer loan are not higher than a home loan.