With the prevalent low-interest rate regime, financial institutions across the country are offering home loans at attractive interest rates. This has encouraged existing borrowers paying higher interest rates to contemplate switching lenders.

However, individuals planning to transfer a home loan balance to lenders offering lower interest rates need to consider certain crucial factors before making the decision.

Points to remember before opting home loan transfer

A home loan balance transfer allows borrowers to shift their home loans from one lender to another for better benefits and interest rates. This enables them to make considerable savings in terms of total interest payment.

Here are some of the crucial points that one should remember while planning to transfer a home loan balance:

• Savings made on the interest cost

The primary motive behind shifting a home loan balance is to reduce the overall interest payment on the outstanding loan amount. Borrowers should remember that the request to transfer a home loan is considered a new loan application by the lender they are moving their loan balance to.

A balance transfer usually comes with various charges, including processing fees, administration fees, inspection fees, application fees, and others. These charges might be levied either by the existing or the new lender or sometimes by both. Therefore, borrowers should carefully calculate to see if the cost associated with the balance transfer is lesser than the interest amount they are saving. In this regard, they can use an online home loan EMI calculator for fast and accurate results.

• Home loan balance transfer documents

Individuals planning to transfer their outstanding housing loan from an existing lender should be aware of the necessary documents required for a hassle-free transfer. One has to collect certain documents from the existing lender and submit them to the new lender. Here are the documents that one needs to collect:

1. Letter of consent
2. No objection certificate
3. Foreclosure letter
4. Home loan statement
5. Post-dated cheque
6. Property documents

Now, borrowers have to submit the following documents to the new lender:

1. KYC Documents: Borrowers have to provide at least one of the KYC documents for the verification process.
2. Address Proof: Lenders will use one of the address proofs to verify the consumer’s address details.
3. Financial documents: This will help the lenders to assess the repayment capacity of the borrower. One has to present Form 16, salary slips and bank details of last 6 months.
4. Property registration documents and title deed
5. Documents of the existing housing loan

Consumers can apply for a home loan balance transfer in a hassle-free manner with these documents in hand.

• Remaining loan tenor

Consumers should ideally opt to transfer a home loan balance towards the earlier stages of their existing loan tenor. This is because borrowers pay the majority of loan interest components during the initial stage of the tenor. So, there would be a lower chance of savings on the interest cost at the later part of the loan repayment tenor.

Moreover, consumers should make sure to keep the loan tenor with the new lender same as that to the remaining tenor with their existing lender. If one opts for a new tenor that is more than the residual tenor of an existing lender, it can lead to increased interest cost.

Leading financial institutions extend pre-approved offers that streamline the loan application process. Such offers are available for financial products like housing loans, LAPs, etc. Individuals can check their pre-approved offers by submitting their essential contact details, and make this balance transfer process a hassle-free one.

Besides knowing the vital factors to review before opting for a housing loan balance transfer facility, individuals should also learn more about its application process.

Steps to apply for a home loan balance transfer

Here’s how one can apply for a home loan balance transfer:

Step 1: Search for a lender and then submit a letter seeking a balance transfer with the existing lender

Step 2: Gather necessary papers from your current lender

Step 3: Apply to a new lender and submit relevant documents like NOC, identity proofs, address and others

Step 4: Once the verification is complete, the new financier will foreclose your housing loan with the current financial institution

Step 5: The existing lender will transfer all loan-related documents to your new financier. This process will end after all post-dated cheques are cancelled

Before applying for a transfer a home loan balance, one should be aware of the above factors to know when one should apply for a home loan transfer. Indeed, a balance transfer can prove to be a highly beneficial tool for savings.