A home loan balance transfer is when you “transfer” the outstanding “balance” of your existing personal loan from one bank/lender to another bank/lender for more favourable terms. The reason could be a better repayment schedule/tenure, or even lower overall interest rates.

When you transfer your Home loan, you no longer owe the balance to the original loan providing bank, you will owe the balance amount with interest to your new bank.

When you transfer the balance of debt from one bank to another, the new bank may give you certain offers like:
• Waiving off one or more EMI payments
• Extending your repayment tenure
• Lowering your overall rate of interest
• Waive off processing fees
• Loan amount top-up in case you as a borrower require additional funds

The most common charge headings for balance transfer are:
• Processing fees: This amount is paid to the new bank to which you are transferring the balance. The new bank will charge you a fee to process your new loan application even during a balance transfer. These can vary from a fixed amount (usually Rs.500) to an amount equivalent to a percentage of the outstanding loan amount itself. However, this amount can be negotiated.

• Foreclosure charges: This amount is paid to the old bank from which you are transferring the balance. The old bank will charge an amount that could be a fixed amount or an amount equivalent to a percentage of the outstanding loan amount. This amount varies between banks, and some banks do not levy and foreclosure charges at all.

If you have more than one outstanding Home loan from different banks/lenders, you can “consolidate” or merge that debt into one single loan – and owe this amount to another bank/lender. Multiple loans mean multiple interest rates and multiple repayment tenures. Consolidating your debt will result in a single interest rate and single repayment tenure for all your outstanding debt. This makes it easier to pay off your debts.

In the right circumstances, you can even consolidate or merge your outstanding debt from different kinds of loans and credit cards into one debt package – and pay this off at a single rate of interest over a set tenure.