How home loan balance transfer and top ups work?

What is Home Loan Balance Transfer?

A Home Loan balance transfer (also known as refinancing or balance transfer) is an option that most individuals choose, to take advantage of lower interest rates in the market. Usually, an existing borrower, who is about 2 or more years into his loan tenure, does not get the benefit of reducing interest rates in the market. That is if he opted for a fixed interest rate. Such individuals could discuss with their finance lending institute and re-negotiate their interest rate. Citing a good repayment track record, among other things, could help. If the finance lending institute is not amenable, they could then shift to another financial institution which offers a lower interest rate for Home Loans.

How does it work?

A home loan balance transfer is like refinancing your home loan completely. To facilitate a home loan refinance, you need to talk to your existing housing finance company and seek a No Objection Certificate (NOC) for a loan transfer. The housing finance company will give you a no objection certificate along with details of the outstanding loan amount. On submission of the NOC and outstanding details to the new housing finance company, payment will be made to the older housing finance company if the loan is approved. The older housing finance company will destroy all your post-dated cheques, and all the remaining EMI payments will be made to the new lending housing finance company with the revised interest rate.

What is Top-Up Loan?

The need for extra funds can arise at any time and for any reason, be it for clearing your debts, renovating your home, or paying for your kid’s education. Top-up loans are a boon to people who are in urgent need of funds. A top-up loan allows you to avail an additional loan amount on top of your existing loan, be it a Home Loan, a Car Loan or a Personal Loan. You can utilise this loan for any purpose.

Here’s an example of a top-up loan: For instance, Divya, a marketing professional in Mumbai, has an income of Rs.10 lacs per year. Assume that her loan eligibility was Rs.50 lacs and she took a home loan of Rs.45 lacs. Now assume that she has serviced the loan EMI for the next three years and now her overall income has gone up to Rs.12 lacs per annum. Her outstanding loan balance is now only Rs.38 lacs. Based on her current income, her new loan eligibility is Rs.55 lacs. If she applies for a ‘top-up loan’, the home loan finance company will deduct the Rs.38 lacs of an outstanding loan from her new loan eligibility of Rs.55 lacs and only provide her Rs.17 lacs (55-38) of the top-up loan. The documentation and the overall process will be faster in this case as there is an existing relationship between the home loan finance company and customer. Also, the history of repayments is known by the housing finance company. With top-up loans and transfer home loan balance, you can fulfil your dreams on time. To transfer your home loan with us, contact us here!

Related Articles:

• What’s More Beneficial? Home Loan Balance Transfer or Top-up Loan?
• Benefits of Home Loan Balance Transfer
• Your Checklist for Home Loan Balance Transfer

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