Home Loan Balance Transfer

The Home Loan Balance Transfer facility enables existing home loan borrowers to transfer the outstanding loan amount from their current lender to a new lender offering lower interest rates and/or extended repayment periods. By availing of lower interest rates through this transfer, borrowers can decrease their overall interest costs. This option is particularly advantageous for individuals who initially obtained housing loans at higher interest rates but are now eligible for significantly lower rates due to an improved credit profile.

Top Banks & HFCs Offering Lowest Home Loan Balance Rates in India

The balance transfer rates offered to existing home loan borrowers depend largely on the lender's evaluation of various aspects of their credit profile, including credit scores, age, repayment capacity, occupation, employer profile, etc. Balance transfer interest rates are similar to regular home loan rates. However, some lenders may offer different rates for home loan balance transfer cases. Below is a table providing an overview of balance transfer rates charged by some of the top banks and Housing Finance Companies (HFCs) in India:

Home Loan Balance Transfer Interest Rates

Eligibility Criteria for Home Loan Balance Transfer

To be eligible for a home loan balance transfer, certain conditions apply:

1. Your property must be ready for occupation or already occupied.
2. You must have completed at least 12 EMIs (Equated Monthly Installments) with your current lender.
3. There should be no outstanding dues on your existing loan with the current lender.

Documents Required for Home Loan Balance Transfer

To apply for a home loan balance transfer, you need to gather the following documents:

KYC Documents:

1. PAN card
2. Aadhaar Card
3. Proof of Residence

Proof of Income:

1. Salary Slips and Form 16 (for salaried individuals)
2. Last 3 years’ Income Tax Returns (ITR) along with financial statements (for salaried individuals, self-employed individuals, and professionals)
3. Last 6 months’ bank statements

Additional Documents:

1. Latest principal outstanding letter from your current lender
2. List of documents from your existing financier
3. Repayment track record from your current lender

Once you have all these documents ready, you can proceed with the home loan balance transfer process by contacting the lender you wish to transfer your loan to. They will guide you through the application process and provide further instructions on documentation and formalities.

How to Calculate EMI on Home Loan Balance Transfer?

Individuals can calculate the Equated Monthly Installment (EMI) of their home loan balance transfer amount manually using the home loan EMI calculation formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. However, manual calculations can be time-consuming and prone to errors. To save time and effort, individuals can use MybankingTips Home Loan EMI Calculator. This calculator is quick, accurate, and convenient to use. It requires just a few loan details, such as the loan amount, interest rate, and tenure, to calculate the EMI along with the total interest cost and total amount payable.

How to Apply for Home Loan Balance Transfer?

To apply for a home loan balance transfer, follow these steps:

1. Approach banks/Housing Finance Companies (HFCs) where you have an existing banking relationship. Many lenders offer lower interest rates on home loans to their existing customers with good credit profiles.
2. Check if you have a pre-approved offer for a home loan balance transfer. Pre-approved offers have lower processing times as applicants already meet most eligibility criteria.
3. Explore and compare home loan balance transfer rates offered by different banks and HFCs on online financial marketplaces.
4. Contact your current lender to negotiate the best home loan balance transfer rates. If your current lender is unwilling to match the rates offered by other lenders, consider transferring your home loan to the lender offering the lowest interest rates.

Home Loan Balance Transfer Process

The home loan balance transfer process typically involves the following steps:

Step 1: Shop around for balance transfer offers from other lenders. Compare their interest rates, features, benefits, processing fees, and other charges.

Step 2: Evaluate the cost-to-benefit of the balance transfer, considering all associated costs. Ensure that the benefits outweigh the costs before proceeding.

Step 3: Negotiate the terms with your current lender to see if they can match or offer better loan terms.

Step 4: Once you decide to proceed with the transfer, obtain necessary documents from your existing lender, including a No Objection Certificate (NOC), foreclosure letter, loan repayment record, and property documents.

Step 5: Initiate the home loan application process with the new lender. Submit the application form and all required documents.

Step 6: Receive a sanction letter and sign the loan agreement with the new lender.

Step 7: The new lender will pay off your outstanding home loan amount to the previous lender through a cheque or demand draft.

Step 8: Once the previous lender receives the outstanding amount, they will cancel all cheques and ECS and close your home loan account.

Why Should You Apply for Home Loan Balance Transfer?

Home loan borrowers may consider refinancing their home loans for the following reasons:

1. Lower Interest Rate: If existing borrowers initially secured their home loans at higher interest rates due to lower eligibility or poorer credit profiles, refinancing can offer the opportunity to avail of lower interest rates. As their credit profiles improve, they become eligible for loans at lower rates.
2. Maximum Tenure: Some lenders allow balance transfer customers to extend their loan tenures beyond the residual tenure of their original home loan. Opting for a longer tenure reduces monthly EMIs, easing the EMI burden. However, it may result in higher overall interest costs.
3. Top-up Loan: Refinancing often comes with the provision of a top-up loan, allowing borrowers to access additional funds for various purposes without restrictions. This can be beneficial for those unable to obtain top-up loans from their existing lenders or facing higher interest rates for it.
4. Additional Benefits: Refinancing with a new lender may offer additional perks such as EMI waivers or zero processing fees, depending on the lender's policies.

Charges Associated with Home Balance Transfer

Apart from the interest rate, home loan borrowers should consider two important charges before opting for a home loan balance transfer:

1. Foreclosure Charges: These charges are paid to the existing lender for closing the loan before the completion of the loan tenure. For floating rate home loans, these charges are typically nil. However, for fixed-rate home loans, foreclosure charges may be as high as 4% of the principal outstanding.
2. Processing Fees: These charges are paid to the new lender for processing the new home loan application (on transfer) and may range up to 6% of the loan amount.