By Ankita Singh Housing finance can provide the necessary funds to buy or build a house. However, availing of the ideal loan terms and conditions may be a challenge of sorts when trying to scout for the most favourable rates. Nevertheless, despite your best efforts at suitable credit selection, you might be dissatisfied with the interest rate or the tenor as the loan progresses. In such a scenario, if you come across another lender who might be willing to offer competitive interest rates and services, you may want to consider loan refinancing. In order to derive optimum benefits from this credit feature and to streamline their finances, borrowers will need to be aware of the home loan balance transfer process.
What Is a Home Loan Balance Transfer?
A house loan balance transfer lets you move your outstanding debt from one lender to another and take advantage of reduced interest rates and more flexible credit provisions. The new lender pays off this balance amount to the previous lender and closes the account; following which you begin making EMI payments to the former as per mutually agreed conditions.
Decoding the Home Loan Balance Transfer Process
Whatever the reason or situation, one can choose a new lender to suit their needs. The usual procedure for refinancing your housing loan entails the following steps:
Place Request for Documents and Foreclosure Statement
You must notify the current lender of your decision to switch lenders. This will call for certain documentation such as:
- Loan papers held by the present lender
- Foreclosure declaration
Submit Loan Transfer Application
Once you have the paperwork, you will be required to furnish a home loan transfer application to the new lender along with these documents:
- KYC papers
- Income details
- Property documents
- A statement from the present lender to signify consistent EMI payouts
Old Loan Closure and New Loan Approval
If they approve your refinancing request, the new lender will issue a cheque for the outstanding amount in favour of the previous lender based on the foreclosure notification.
Release of Property Documents from Previous Lender
Your old lender will then release the property papers upon loan closure and also grant a no-dues certificate in your name, implying no dues owed on the previous loan. After the new lender receives all the necessary documents, they will complete the home loan balance transfer process.
Home Loan Balance Transfer Eligibility Criteria
If you want to transfer an ongoing home loan, it is essential that you meet the standards set by the new lender. Although the qualifying criteria may be specific to each lender, certain prerequisites are common among all lending institutions. These include:
- The borrower should be a residing Indian citizen
- Individuals must be between 23 to 65 years old
- Applicants must be self-employed or salaried individuals
- They should have repaid a specified number of EMIs
- There can be no pending dues owed to the current lender
- Borrowers should be occupants of the concerned property or preparing to move in
Advantages Of Transferring Your Home Loan Balance
Housing loan customers favour moving to other lenders for more attractive interest rates and terms. Some of the major advantages of loan refinancing are:
- Reduced interest rates: The new lender’s lower home loan interest rates can ease your monthly repayments resulting in sizeable savings, paving the way for other important commitments or investments.
- Flexible rates: The new lender may charge interest in accordance with the RBI’s benchmark lending rate. Thus, whenever the benchmark drops, one can expect lower interest rates. You could further modify the interest regime from fixed rate to floating rate or vice versa depending on financial market trends.
- Longer tenor: You may extend the loan tenor if you wish to lower the applicable interest and EMI outgo. But it will also mean a higher interest outgo hiking your credit cost.
- Decreased compliances: In contrast to your present lender, the new one may require fewer compliances and paperwork.
- No hidden fees: In cases where the previous lender might not have clarified loan terms and fees right at the onset, the new lender could bring in transparency.
Summing Up
Shifting your house loan allows you to revise the existing credit terms and conditions in line with your precise requirements and financial position. Since one receives maximum gains from a balance switch in the early years of loan repayments, rethink the pros and cons of refinancing a home loan before applying. Carry out a comparative analysis to assess the viability of a home loan balance transfer process. Only if the positives outweigh the drawbacks, will this credit option work in your favour.
