When and How to Opt for
Home Loan Balance Transfer or Refinancing?
Home loans are typically one of the lowest-interest loans available in India and a multitude of banks and financial companies offer them at varying interest rates along with other benefits. A premier digital loans marketplace like Fincity eases out the often-tedious process of comparing and choosing the right home loan offering for you with the lowest interest rate (as low as 6.70%), optimal amount and tenure. Let’s say you have an existing home loan and want to transfer the balance to another lender after evaluating the EMI you may save by doing so, or simply because you want to avail of other facilities like a loan top-up. You can easily do that via Home Loan Bank Transfer. The documentation is similar to applying for a fresh loan but relatively simpler. But first, estimate the pros of carrying out this balance transfer with the help of Fincity’s Home Loan Balance Transfer calculator. Simply enter details such as outstanding loan amount, tenure, interest rate and processing fee and you’ll get a clear view of the amount you will eventually save by transferring your loan balance to another bank.
To break it down, one should opt for a Home Loan Balance Transfer:
If you are paying off a loan at a higher interest rate than the one you want to transfer to.
If you want to avail of other benefits offered by the other bank such as loan Top-up.
Once you transfer the Home Loan balance to another bank offering a lower interest rate, either the EMI will reduce and the tenure will remain the same or the EMI will remain the same and the tenure will be shorter. In either case, you will save money!
Note : Processing fee stands at 0.12 -2% of the loan amount; it’s important to keep an eye out for other additional (hidden) charges and then decide if you’re still benefitting, all charges considered.
|BANK||INTEREST RATE||PROCESSING FEES|
|Aditya Birla Housing Finance Home Loan||7.85% onwards||0.125% of the loan amount with a min. of Rs. 500 & a max. of Rs. 5000|
Note : The interest/processing details are subject to change at the lender’s discretion and based on RBI directives.
Calculating EMI on Home Loan Balance Transfer
How much you may save depends of factors such as:
The outstanding principal loan amount
The interest rate at which the lender is offering the loan
These when compared to the current EMI amounts and tenure will tell you how much you’ll save monthly and in total.
Let’s assume that you have an outstanding principal amount of Rs.50 lakhs at 8.6% interest rate payable for a tenure of 20 years. In this case, your monthly EMI is Rs.43,708. If you transfer your loan balance to another lender offering an interest of 7% for the same tenure, your monthly EMI comes down to Rs.38,765. The total amount you pay towards the loan reduces from Rs.1,04,89,954 to Rs.93,03,589.
Note : When you decide on a balance transfer, the current lender may try to retain you by offering a desirable interest rate (less than what you are currently paying). In such a case, it’s advisable to check if you will end up saving a reasonable amount with the current lender.
Home Loan Balance Transfer facility is available to all salaried and self-employed people but lenders may have unique criterias in place. Some common ones, however, are:
You must be an Indian national between the ages of 21and 60. For self-employed professionals, the age limit is 65.
Your credit rating should not dip. This is evaluated and may risk your chances irrespective of whether you had a good credit score during the initial application of loan.
You should have required incomes to pay off the loan amount.
In some cases, lenders have a specific requirement of minimum gross family income.
You have to either have been employed by your current employer for a minimum number of years (generally 2) or your company should be operational for a minimum number of years (generally 2).
Steps to Home Loan Balance Transfer
Here’s a quick guide to steps involved in obtaining a Home loan balance transfer:
Analyze the current situation and benefits
Before you go through with a loan transfer, some things to keep an eye out for will be the fact that home loans at fixed interest rates will be subject to a prepayment penalty when the transfer occurs while a loan at floating interest rate will not be charged anything. Longer tenures are preferred for their low EMIs and added benefits. Also, as pointed out earlier, there may be hidden costs; make sure you’re aware of them.
NOC from current lender and builder
Along with the No Objection Certificate (NOC), you will need to obtain a foreclosure letter from the bank with a list of documents already submitted to the lender and your payment history. You will also need to get an NOC letter from the housing society or builder as proof of your ownership of property.
Apply to the selected bank for balance transfer
Once you have collected and submitted all the required documents to the bank, they will evaluate your ability to pay off the loan in Equated Monthly Instalments (EMIs). At this point, you can choose to top-up your balance with an additional amount. You can choose to utilise this opportunity in place of taking a personal loan/ business loan. You can also make changes to your loan tenure or EMI amounts.
The lender will conduct a thorough background check and history assessment while appraising your credit rating. Don’t forget to check it yourself first with Fincity’s free Credit Report. Once all of these are checked along with ownership authentication and document verification, the lender will hand you documentation stating details such as the new loan’s interest rate, tenure and more.
The lender may ask for a few more documents to submit in order to complete the transfer.
Documents are the most vital part of the application process with the new lender requiring you to provide them with all the documents you had submitted during the initial loan application. These documents are vetted by the new lender to evaluate your capability to repay the loan. Although some lenders may ask for more documents, these are some of the important documents most lenders will require from you.
Completed application form for transfer issued by the financial institution.
Latest three months’ Salary Slips indicating break-up of Gross salary that is the Basic Pay, House rent and Net Salary after deductions, if any.
Six months’ bank statement reflecting salary credits updated within 15 days before you apply for the loan.
Identity Proof (Any One): Pan Card, Passport, Driving License or Voter ID card or employee identity card (as identity proof and signature proof in case of government employees).
Proof of Age (Any 1): 10th or 12th Marks Cards, PAN Card or Voters ID Card.
Instead of Points (3.) and (4.), a self-employed professional or business person will need to provide documents proving the existence of their business (for businesspersons) and academic qualifications (for professionals) , as well as financial statements.
Bank statements from the account from where the home loan EMIs were deducted in the last 12 months.
The Loan statement copy and complete set of documents relating to the property that is currently in possession of the present lender.