Understand How Home Loan Balance Transfer Works!

You may want to transfer the outstanding balance on your housing loan for various reasons. It is not a complicated procedure; however, there are certain things you need to remember before opting for such transfer. Procuring a home loan from a reliable partner is as crucial as choosing the right property. At Indiabulls Home Loans, we allow you to transfer your existing housing loan from any private or foreign bank, housing finance companies (HFCs), and scheduled commercial banks (SCBs). You may choose to transfer your housing loan with us to enjoy a lower Equated Monthly Installment (EMI) or a reduced rate of interest. Additionally, you may opt for the balance transfer on your loan against property (LAP).

Home loan balance transfer procedure

As the first step in the home loan balance transfer procedure, you will have to provide your existing lender with a letter stating that you want to transfer the loan. Once your request is received, the lender will provide you with the No Objection Certificate (NOC) or a consent letter. Your existing lender will also provide you with a statement showing the outstanding balance. All these documents must then be submitted to the new lender. The new lender will then pay the outstanding balance amount to your old lender to close your loan account. At the end of this transaction, the old lender hands over property-related documents to the new lender. If you have given post-dated checks (PDCs) to the old lender, these will be canceled. When you choose to transfer your loan to a new lender, you need to remember that you will have to undergo the entire procedure that you first went through when you first applied for a home loan. Therefore, the new lender will undertake the legal verification of all property-related documents, check your credit rating, and do a technical evaluation. The new lender will approve your balance transfer application only when all these checks are satisfactory. One reason why you may choose to transfer your loan is to enjoy a lower rate of interest. The new lender will often give you the rate that it currently levies to other housing loan borrowers. However, you may negotiate the same to try to avail of a further reduction to the rate of interest.

Features of home loan balance transfer

A housing loan balance transfer has several beneficial features as listed below:

  • Lower home loan interest rate
  • Special interest rates for women applicants
  • Additional top-up to the outstanding balance
  • Affordable without any hidden charges
  • Customized repayment options to suit your financial situation
  • Easy online access to manage your account
  • Prepayment option to reduce your total outflow
  • At home service for your convenience

Before you opt for the balance transfer of your housing loan, it is important you check for any prepayment penalty levied by your existing lenders. Some financial institutions may levy between 2% and 5% of the outstanding amount as the prepayment penalty. This may make the transfer unviable. Additionally, the new lender may levy processing fees, which may be between 0.5% and 1% of the borrowed amount. It is advisable that you negotiate with the new lender to waive off the processing fees to make the balance transfer more cost-efficient. There are several reasons in addition to interest rate reduction to opt for a balance transfer. These include service issues with your existing lenders or it may not be willing to provide a top-up or unwillingness to re-negotiate. However, before you make the decision to transfer, consider all aspects as mentioned above.

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