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Home Loan Balance Transfer
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A home loan involves a significantly large amount of money and therefore, the interest rate on the loan is a matter of concern for everyone who decides to take a home loan. Home loan interest rates may begin from 8.35 % and go to 12 % or higher and One of the most common ways to reduce interest rates is to either talk to the bank that has provided you the loan and request them to reduce it or go for a transfer of your outstanding existing home loan or in layman terms, shift your home loan to a bank offering lesser interest rates.

Home Loan Balance Transfer or Refinancing or simply Balance Transfer is the process that allows you to benefit from the lower interest rates offered by other lenders. If you have an existing outstanding home loan with one lender, you can make a home loan transfer, that is, shift the remaining loan amount to a different lender who charges a lower rate of interest from you. This process is known as home loan balance transfer or refinancing. This unique home loan transfer service helps a customer in avoiding high applicable interest rates of one home loan lender and migrate home loan to a lower interest rate structure with another lender.

Key Features of Home Loan Balance Transfer

  • Transfer the outstanding balance of your existing home loan to another bank/lender.
  • There is a processing fee to be paid to the new lender by the borrower usually equal to 1% of the loan transferred loan amount that is payable to the new lender for a home loan by the borrower.
  • In most cases, the home loan balance transfer application is treated similar to a new home loan application.
  • The balance transfer on an existing home loan can only be availed after a pre-determined time period as mentioned in the original loan agreement.
  • When the transfer is complete, the borrower owes the transferred principal loan amount plus applicable charges to the new lender instead of the original one.
Home Loan Balance Transfer

The most important benefit of availing a home loan balance transfer is saving that it can save money. The difference in interest rates between the two lenders, the tenure of the loan and the amount outstanding are the three primary contributing factors in this process. If you see a significant benefit in the home loan interest rate of the new lender, it may well be worth considering a switch to the new home loan lender. You must first and foremost identify the objective for availing the balance transfer of your loan. Then you must ensure that your new home loan helps you bring down your overall cost of acquisition. The reasons for switching the lender could include:

  • Reducing the EMI burden every month
  • Reducing the total amount of money to be paid as the interest on the loan
  • A person could also consider applying for a balance transfer simply to avail attractive discounts and benefits being offered by the other lender.

Any salaried, self-employed professional or self-employed businessperson with an outstanding home loan which has been regularly serviced can apply for a home loan balance transfer. Though all loan providers have different criteria, some basic ones are as follows:

  • You must be of Indian nationality and of an age 21 to 60 years. Whereas, self-employed individuals are eligible for the transfer up to 65 years.
  • Your credit rating should not fall in the run-up to your loan transfer application. Irrespective of your credit rating during the initial loan application, if the rating dips by the time of transfer, banks might reject your application for refinancing.
  • You should either be employed by your current organization for a certain number of years or your company should have been operating for a time period specified by the lender. This period is generally 2 years.
  • You should have some monthly repaying capacity or the required minimum salary.
  • Some banks may also require a minimum gross family income specified by the lender.

Your home loan balance transfer application is treated similar to a fresh home loan application by the bank you are transferring the loan to. Therefore, while applying for your home loan balance transfer to another bank, all the documents provided during the initial home loan application need to be resubmitted. These documents are then revalidated and vetted by the bank or NBFC providing the loan transfer facility. Documents are the most important element while borrowing a loan because they best help the bank to identify the borrower's loan repayment capabilities. The prerequisite key documents for home loan transfers are the following:

  • Passport-size photographs of the primary borrower/co-applicant.
  • Completely filled application form which was issued by the financial institution to you for transfer.
  • 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 the loan application.
  • Identity Proof (Any One): Pan Card, Passport, Driving License or Voter's ID card or employee identity card (as identity proof and signature proof in case of government employees).
  • Proof of address
  • Proof of Age (Any One): 10th or 12th Marks Cards, PAN Card or Voters ID Card.
  • If you are a self-employed professional or businessperson, then instead of Points (3.) and (4.), you need to provide documents proving the existence of your business (for businesspersons) and academic qualifications (for professionals) ; and financial statements for both.
  • Bank statements from wherein the home loan EMIs were deducted amounting to last 12 months of the account.
  • The Loan statement copy and complete set of documents relating to the property that is currently in possession of the present home loan lender.

State Bank of India: SBI home loan transfer offers unique advantages and exclusive benefits on the home loan to transfer, including one of the lowest interest rates. With over 13,700 branches nationwide, banking with SBI is convenient and easily accessible.

ICICI Bank: You can save money by transferring your current home loan that you have availed from other Banks and Non-Banking Financial Companies (NBFCs) to ICICI Bank. The bank offers and benefits like additional top-up loan amount up to 100% of the original home loan. Other features of the balance transfer scheme include attractive interest rates and simplified documentation.

HDFC Bank: Availing the HDFC Bank home loan balance transfer, leading home loan provider in India, is among the smartest ways to lower your EMI payments. Additionally, through this scheme, you get the option of a top-up home loan which doesn't exceed Rs. 35 Lakhs on your current outstanding loan amount. Additional benefits include lower interest rates as compared to the original home loan, repayment options through core banking solutions as well as repayment options customized to your specific circumstances.

Home loan balance transfer interest rates for various banks:

Bank Name Floating ROIs Processing Fee Loan Amount (Rs) Tenure
SBI 8.50% onwards Rs 2,000 - Rs 10,000 5 lakh-10Crore 1-30 Years
India Bulls 8.65% onwards 0.5% - 1% of loan amount (min. Rs 7,500) 2Lakh-3 Crore 1-30 Years
PNB 8.90 % onwards Rs.5,000 to 0.25% 5Lakh-5 Crore 1-30 Years
ICICI Bank 8.65% onwards 0.5% - 1% (Max. Rs. 2000) 5 lakh-10 Crore 3 -30 Years
HDFC Bank 8.65% onwards Up to 0.5% 5 lakh-10 Crore 1-30 Years
Axis Bank  9.15% onwards Rs.10,000 5 lakh-10 Crore 1-30 Years
DBS Bank 9.30% onwards 0.25% to 1.50%   50 lakh-5 Crore 1 - 25 Years
Kotak Mahindra 9.10% Rs.0 onwards 5 lakh-5 Crore 15 - 20 Years
BOI 8.65% onwards Rs.0 Up to 5 Crore 30 Years
IDBI Bank 9.30% onwards Rs.0 5 lakh-10 Crore 25 Years

*The facts and figures mentioned above are indicative and subject to periodic change.

Guiding Steps to Home loan Balance Transfer:

Due to different home Loan interest rates offered by different banks and loan lenders for existing and new customers, several customers get upset with their high home loan interest rates. This is the point when you can consider a switching your lender and transferring your home loan to a bank offering lower interest rates as compared to your existing lender. Here is a guide to get you in the clear about Home loan Balance Transfers-

Step 1: Analyze cost benefits being offered Decide the viability of transferring your home loan by analyzing the current situation of your loan. Here are some guidelines to help you with the analysis:

  • On home loans with fixed interest rates, the lender will charge the borrower a pre-payment penalty to transfer the loan.
  • Whereas, on floating home loans of high value and interest rates, generally no penalties are charged. Hence, transferring your loan to a lower interest rate will be beneficial.
  • Transferring to long tenure loans may be beneficial for those who want to reduce their EMIs amount but have no issues with increasing their loan tenure.
  • Also, do keep an eye out for hidden costs in the process.

Step 2: Get NOC from the existing bank Getting a No Objection Certificate (NOC) from your current home loan provider is a key step in the home loan balance transfer process. The other document that is necessary to complete this step of the loan balance transfer system is a foreclosure letter along with the complete list of loan documents held with the bank as well as your loan  repayment history. In some cases, your current bank may try to retain your business by offering you a reduced interest rate compared to what you are currently paying. Make sure you analyze such an offer as well as other offers thoroughly before settling on a specific one.

Step 3: Apply To New Bank Now you must have all the required documents ready to transfer your existing home loan to another bank of your choice. You will also require getting a No Objection Certificate from your housing society or builder, this will have to be submitted as a proof of ownership to the bank along with all the other documents. Then, the new bank will check your ability to pay the monthly instalments. While applying for balance transfer, you can decide to top up the balance on your home loan, reduce tenure or change your home loan EMIs too.

Step 4: Credit Approval At this step, bank will evaluate your application and decide your eligibility for home loan balance transfer. Extensive background checks and history assessment will be carried out before the bank gives you a credit approval. These verifications include a re-evaluation of your home loan, checking your credit history, checking the authenticity of ownership and document valuation. Once the issues related to Credit Approval are resolved, the home loan provider will provide you with documentation that mentions key information such as the new home loan interest rate, tenure and other features. Once this step is completed it will be time for you to decide whether to go through with the balance transfer or to stick to your current loan provider.

Step 5: Documentation with Chosen Loan Provider At this point, if you decide to finalize the home loan transfer process, you would be required to complete the documentation process with your selected loan provider. They may require a few extra documents to complete the whole transfer process. Finally, you will have your home loan transferred at a lower interest rate and better benefits.

Banks are very careful when taking over your home loan, This is where Paisabazaar can help you.

Our Home Loan Balance Transfer Calculator can help speed up your decision-making process by sifting through all the offers available based on the information provided by you. Our online tool automatically generates a comprehensive comparison report based on your requirements to help you make an informed decision. Our calculator takes everything into consideration, such as your total and outstanding loan amounts, remaining loan tenure and the existing rate of interest on your home loan. We will also provide you with the fine print of the transfer agreement to aid your decision.

Q. When is a home loan balance transfer a good idea?
Ans. The key reason for transferring your home loan from one lender to another is to benefit from a lower interest rate being provided to you by the new lender.

Q. Is there a limit to the amount I can transfer?
Ans. Yes. The maximum balance transfer amount is equal to the outstanding amount of the home loan.

Q. When should I not consider transferring my home loan?
Ans. You must not consider transferring your home loan if one of the following is applicable in your situation:

  • You have been repaying the loan for a long time now
  • Your current bank has a prepayment penalty
  • You are planning to move out of the property in the near future

Q. Does my current credit score affect my chances of successfully completing the transfer?
Ans. In case your credit score has dropped significantly since you applied for the initial home loan, it might affect the process. As the balance transfer process works similar to applying for a new home loan, your credit score and history would play a key role in determining your eligibility for the home loan balance transfer.

Q. Will my refinance be affected by the prepayment penalty?
Ans. Most banks these days don't have a prepayment penalty in the first place. But if your bank has it, then you can ask your new lending bank to take it into account. This will vary from bank to bank.

Q. How much time will it take to transfer my home loan from another bank?
Ans. Transferring a home loan is treated like buying a home loan all over again by the bank, the loan is transferred to. Therefore, it might take 15-20 days or more for the home loan to be transferred to the new bank.

Q. What is a top up loan?
Ans. A top up loan is borrowed when the price of your property has risen significantly since you borrowed the loan and you now need extra money to refinance your property. Such a loan is also granted if you are looking to renovate your home.

Q. Can I get a top up on my loan along with the transfer?
Ans. Yes, depending upon your eligibility, the loan issuer can offer you the option to top up on the home loan to be transferred to the new bank but there may be processing and legal charges applicable.

Q. What processing fee is charged on home loan transfer?
Ans. Processing fees on transfer of home loans usually range from nil to 1% of the loan amount.

Q. Is there any interest saving in EMI by home loan transfer to another bank?
Ans. The precise reduction in EMI varies based upon:

  • Outstanding principal amount
  • Existing rate of interest charged by your bank
  • Rate of interest presently offered by the new bank
  • Your current EMI

Q. What steps does a home loan takeover involve?
Ans. The simple steps detailed below are involved in transfer of your loan:

  • Check the current interest rate to calculate interest savings
  • Estimate the cost based on the various fees and charges
  • Shortlist a new bank and decide if a top up loan is needed
  • Collect the property documents deposited in your existing bank, and the foreclosure letter as well
  • Apply for the loan with the new bank and submit requisite property documents and other documents.
  • Obtain sanction letter to execute new loan agreement
  • Get disbursement from the new bank by way of cheque or demand draft in favour of existing bank, and then deposit the same
  • Obtain and deposit property documents from old bank to new bank

Q. What precautions must be taken when transferring a home loan?

  • Check and analyse the interest rate track record of the new lender and ensure that the lower interest rate offered by the new lender is genuine. You can compare offers by various banks on Paisabazaar website and ask our expert team for suggestions and clarifications.
  • Assess the service quality of the new lender to make sure they meet your expectations. Lower rates shouldn't come at the expense of below par service.
  • Check the benchmark rate: Check whether the benchmark rate is the base rate or prime lending rate. Loans which are base rate benchmarked are more transparent and are preferred over lending rate benchmarked loans.
  • Check whether the spread is variable or fixed: This is an important question. The two parts of an interest rate applicable on floating rate loans consist of a benchmark rate along with the spread above it. The benchmark rate is expected to change over time, but the spread is supposed to stay fixed, except in case of default. You must avoid loans having variable spreads and opt for floating rate loans that have a varying interest rate only with a change in the benchmark rate.
  • Estimate transaction costs which would include the processing fees, documentation charges and stamp duty.
  • Issue notice to the existing bank prior to applying for another. Check your loan agreement carefully and make sure that due notice is given to or waived by your existing bank.
Home Loan Balance Transfer
4.2 / 5 (10 Reviews)

Home Loan Balance Transfer

PaisabazaarHome Loan
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Very good facilities by Paisabazaar

I visited the website to check personal finance products. The website helped me a lot to clear my confusion between Personal Loan and a Home Loan. Finally I applied for a Home Loan to buy a new house. It took me less than 2 minutes to fill in the loan application page. Further, I selected few l..Read more...


Posted on: Jan 20 , 2017
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Posted on: Dec 20 , 2016
PaisabazaarHome Loan
4/5

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I applied for this SBI home loan and to my surprise I got the loan amount within a week. I was worried about as I have never used online process for banking or financial services. Paisabazaar was very helpful and the customer service people were very nice and polite. Good job by Paisabazaar.


Posted on: Dec 19 , 2016
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Very good experience

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