FinanceGeneral Knowledge

Understanding the Process of a Home Loan Balance Transfer

Understanding the Process of a Home Loan Balance Transfer

A home loan is one of the few kinds of debt that can help you increase your asset portfolio. A loan with favourable terms and conditions can make the process of owning a home much easier for you. However, this may not always be the case. You may have availed a loan at a specific rate of interest, and a few years later, another bank or financial institution may be offering a lower interest rate. 

Alternatively, the market interest rates may have reduced, leaving you with a costly debt. In such situations, you can rely on the home loan balance transfer facility to reduce your financial burden and make your loan more affordable.

What is a Home Loan Balance Transfer (HLBT)

A home loan balance transfer is a facility that allows borrowers of home loans to transfer the unpaid principal on their loan from one lending entity to another. This facility is generally useful if a new lender has entered the market, offering the same loan you have availed at more attractive interest rates. Alternatively, an existing lending entity may have lowered the rates of interest it charges on home loans.

The Process of a Home Loan Balance Transfer

The process of a HLBT is fairly simple. Here is a closer look at the basic workings of a home loan balance transfer. 

  • You transfer the unpaid principal on your home loan from one bank to another. 
  • Your new lender then pays the balance loan amount to your old lender.
  • You will have to continue repaying the loan (principal + interest) to your new lender. 

That said, there are some fees and charges that are involved in transferring your home loan from one bank or financial institution to another. Here is a closer look at these costs.

  1. Home Loan Transfer Processing Fees: 

This fee may be collected by banks or financial institutions when they process the documents for your home loan balance transfer. 

  1. Foreclosure Charges: 

If you wish to repay all of your debt before the end of the loan repayment tenure, the bank may charge a small fee as foreclosure charges. 

  1. EMI Bounce Charges: 

If you pay your EMIs via cheque, the bank may levy EMI bounce charges in case your cheque does not go through on time. 

  1. Penal Interest: 

This charge is levied if you pay the EMI on your home loan after the due date. 

List of Documents for Home Loan Transfer

Before you apply for the HLBT facility, it is essential to know what paperwork you will need for the same. Here is the list of documents needed for home loan transfer.

  • Proof of identity like PAN, Aadhaar card, voter’s ID etc.
  • Proof of address like Aadhaar card, driving licence, voter’s ID etc.
  • Last 6 months bank account statements
  • Last 3 months’ salary slips or Form 16 for salaried individuals
  • Audited profit and loss statements for self-employed individuals
  • Photograph of the applicant 
  • Property documents 
  • A letter from the old lender stating the outstanding amount

Advantages of a Home Loan Balance Transfer

Opting for a home loan balance transfer can benefit you in many ways. Here are the top advantages of availing this facility. 

  • Lower Interest Rates: 

This is the primary benefit of transferring your home loan from one lender to another. You can reduce your monthly EMIs and your overall debt by getting lower interest rates.

  • Flexible Repayment Tenures: 

You can even choose to customise the repayment tenure for the rest of your loan, as per the terms and conditions of the new lender. 

  • Loan Top-Up: 

Some lenders also allow you to avail a top-up facility along with a balance transfer facility. This can help you meet any additional financial needs for your home purchase or construction.

Conclusion

This sums up the process of a home loan balance transfer, as well as the fees involved and the list of documents needed for the home loan transfer. You can make use of this information to take a good decision on whether you want to continue with your current home loan, or transfer it to a new lender with more favourable terms. 

Parasshuram L Shalgar

Parasshuram L Shalgar: A distinguished Senior Editor, Parasshuram boasts an impressive 20+ years in the media realm. His extensive experience reflects a profound understanding of the industry, resulting in insightful and authoritative content that resonates with diverse audiences.

Related Articles

Carlsberg Beer Prices in Bangalore Tuborg Beer Price in Bangalore Budweiser Beer Prices in Bangalore Top 10 New Year’s Eve Party Spots in Bangalore Old Monk Price in Bangalore: Your Guide to the Latest Rates Top 10 Christmas Movies to Watch This Holiday Season! AI Imagines Indian Cricketers As Santa Claus Best Jack Daniels Whiskeys and Their Alcohol Percentage