If you have already taken a home loan for owning a housing property but are unhappy with your existing lender’s service and/or rate of interest, you might be looking to explore other options in the market. You, most likely, will have to undertake what is known as a home loan balance transfer. It is simply a process by which you can shift your existing (and the remainder of your) home loan from an existing lender to a new one, provided you have completed at least a 12-month EMI payment period with your existing lender.
What are the reasons which encourage a person to want to transfer their existing home loan to a new lender? Let us see below:
- Poor customer service by your existing lender which can range from inaccessible or unresponsive personnel and long TATs for issue resolution to non-transparent systems and policies, etc.
- A more expensive home loan in the present owing to a higher rate of interest than what may be offered to you by another lender of equal standing. Most people transfer their home loan when another bank or lender offers them a much more competitive rate of interest, which helps the borrower save some money.
- Better banking facilities such as no charges on pre-foreclosure, more transparent policies and systems, more customer-friendly culture, easier paperwork, quicker TATs for issue resolution, and so on.
- Availability of a larger quantum of top up with the new lender.
- Unaffected CIBIL score to the extent that you have repaid your loan for the previous 12 months on time.
- Minimum or zero additional charges for transferring the home loan, in the form of processing fee, transfer fee, service fee, and so on.
- The end of the lock-in period with your existing lender, who has not lived up to your expectations of superior customer service and failed to accommodate requests related to lowering of interest rates and or other charges.
Let us now see what are the eligibility criteria for transferring home loan. A home loan balance transfer calculator incorporates most of the factors similar to what a lender will consider when reviewing a fresh home loan application:
- Current monthly income, historic trends in income, and income projections for the remainder of the home loan tenor.
- Credit/CIBIL score which takes into account one’s past debts, repayment history, defaults (if any), timeliness in payment of total outstanding dues on one’s credit card(s).
- Savings and investment practices—lenders feel more confident about approving the loan application of those potential borrowers who invest their money in safer, less risky, and optimally liquid assets like PPF, FDs, government bonds, debt funds, etc.
- Age, profession, and life stage of the applicant—the younger the applicant, the lower will be the rate of interest offered to them. Similarly, people with MNCs or in government jobs are offered better interest rates. People with a smaller family (less no. of dependents) are offered a lesser rate of interest.
- Market value of the property in question and the reputation of the builder also impact one’s eligibility to transfer the home loan to another lender.
Having understood the need for a home loan balance transfer and the eligibility criteria for the same, let us now familiarise ourselves with the process of applying for a home loan balance transfer:
- Be prepared to supply documents like PAN card, Aadhar card, IT returns of past three years, salary slips or income proof (for the self-employed) of the past at least six months, educational certificates and other such identity proofs like passport, voter’s card, etc.
- The new lender will also need some data, as stated below, from the existing lender:
- a letter from the existing lender permitting the transfer (an NOC), and disclosing the list of property documents (which will need to be handed over to the new lender till the loan is repaid)
- specifying the home loan balance amount and the existing rate of interest
- proof of timely repayment (may ask from the borrower and the existing lender)
- Having gathered the above in place, apply for a home loan balance transfer with a new bank/lender and they will take care of the needful. The transfer may take a couple of weeks to be approved and implemented
It is, however, important to bear the following in mind before starting a process for a home loan balance transfer:
- Educate yourself about the existing home loan interest rate in India in relation to the services offered by a lender. Sometimes, a lender may charge a slightly higher rate for better services, in which case you might want to be sure of the new lender matching up to the service levels at a lower rate.
- Be thorough about the conditions in your current loan agreement and evaluate the benefits in a new loan document in its comparison. You do not want to regret the balance transfer decision.
Make an informed decision when it comes to a home loan balance transfer.