Caught in the mess of repaying your loan at a high interest rate and looking for a way out? Interest rates might bother you, especially if you have wanted a change in your lender for a long time and you still don’t know if it’s a good deal or not. You should consider a home loan balance transfer. We will tell you why and how in this article.
Here, you will find everything you need to know about the balance transfer of your home loan, how to do it, the benefits, the home loan balance transfer interest rate, and more.
What is meant by home loan balance transfer and why is it done?
By definition, a home loan balance transfer is a process to transfer your current home loan’s outstanding balance from your existing lender to a new lender. You can do this for:
- Better terms
- Lower interest rates
- Lower EMIs
- More flexible loan repayment
- Better customer support
- Loan top-up
- Longer loan tenure
Before switching to a new lender, make sure you thoroughly read your agreement. Confirm that you are getting a lower interest rate and better terms and conditions than your previous loan. Also, check for hidden charges and clauses.
What are some of the benefits of a home loan balance transfer?
Here are some advantages of home loan balance transfer:
- Lower rate of interest.
This is the primary reason why borrowers transfer their home loans. New borrowers provide you with a low rate of interest and better terms and conditions. Even a small percentage decrease in your loan amount makes a huge difference in your EMI. Even if the decrease is 1%, it creates a good impact on your EMI amount.
However, you will also have to keep in mind the charges for balance transfers and the home loan balance transfer interest rate, which starts at 9.60% p.a.
- The long tenure of repayment:
Tenure of repayment, most of the time, is long which means you will get enough time to repay your home loan. Most of the time, the tenure is about 15 years, but it can be extended to 20 years or even 30 years depending on your credentials. Although you end up paying more interest over the longer tenure, it gives you enough liquidity each month.
- Suitable loan terms:
The terms and conditions of the new lender after the balance transfer are going to be better than the previous lender. It is also your primary job to find the one that suits you the best. Suppose, the previous lender charged you a high processing fee and penalties. After a home loan balance transfer, you should look for a lender who charges you zero to minimal processing fees and no penalties.
- Quality service:
Aside from lower interest rates, the new lender is likely to provide better service. This includes improving the quality of your terms and conditions, providing regular updates on your loan status, sending reminders to pay your EMI on time, etc.
You might need a top-up on your home loan for interiors, renovations, etc. if your current lender can’t provide you with this much-needed top-up. Some other lenders might be happy to help.
Eligibility for Home Loan Balance Transfer
Check these conditions to see if you are eligible for the home loan balance transfer:
- You should have paid at least 12 monthly installments.
- Check if you meet the criteria for the minimum principal amount and the tenure of the lender you are considering.
- Make sure you have a good credit score.
These criteria might vary from lender to lender. Check with the one you are considering to see what criteria you need to meet to be eligible for the balance transfer.
What is the process for a home loan balance transfer in the current year?
Here is the process you should follow to change your existing lender and transfer your balance to a new lender.
- Write an application to your current lender:
The first step is to write an application to your existing lender and let them know that you want a home loan balance transfer.
- Collect a No Objection Certificate:
After processing your application, the lender will give you a NOC and a consent form stating that they are ready for the procedure.
- Searching for a new lender:
This task takes a lot of time, and, in the whole process of a home loan balance transfer, this requires the maximum effort. You must make a list of the lenders who seem to fit your requirements. You can make consultations with different bank executives or your advisor for this.
- Submit your documents to the new lender:
Submit all your documents to the new lender, like your KYC, NOC, etc., regarding transferring.
- Wait for the final confirmation from the previous lender:
A final confirmation letter comes from your previous lender, which you have to hand over to your new lender.
After this process, you can start paying your EMI to your new lender.
Wrapping it up
The interest rate seems to play a huge role in the process of a home loan balance transfer. If interest rates do not suit you, look for new lenders with better interest rates, terms, and other conditions. Research well, and don’t make haste.
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