Home Loan Balance Transfer

Home loan balance transfer interest rates offered to existing home loan borrowers would largely depend on the lenders' assessment of the various aspects of their applicants' credit profile, such as their credit scores, age, repayment capacity, occupation, employer profile, etc. They are usually the same as the regular home loan interest rates.

However, there are a few lenders that offer different rates for home loan balance transfer cases. The following table will give you a fair idea of balance transfer rates charged by some of the top banks and HFCs in India:

Home Loan Balance Transfer Interest Rates of Banks/HFCs

Note: Interest rates as of 9 July 2024

To apply for home loan balance transfer, existing home loan borrowers should:

• First approach banks/HFCs with whom they have a banking relationship as many lenders offer home loans at lower interest rates to their existing customers having good credit profile.
• Check whether you have a pre-approved offer for home loan balance transfer. Such loans have lower processing time as the applicants already meet most of the eligibility criteria set for the loan.
• Visit online financial marketplaces to explore and compare home loan balance transfer rates offered by other banks and HFCs.
• Then, contact your existing lender to match the best home loan balance transfer rates. If your current lender refuses to do so, then shift your home loan to the lender offering the lowest home loan interest rates.

Besides interest rate, there are various other costs involved in home loan balance transfer. Two of the important charges that home loan borrowers must look into before going for balance transfer are as below:

• Foreclosure Charges: These charges are paid to the existing lender for closing the loan before completion of your loan tenure. These charges are nil on floating rate home loans. However, for fixed rate home loans, these charges may go up to 4% of the principal outstanding.
• Processing Fees: These charges must be paid to the new lender for the processing of your new home loan application (on transfer) and may range up to 6% of the loan amount.

Following are the documents required for home loan balance transfer.

• KYC Documents: PAN card, Aadhaar Card and Proof of Residence
• Proof of Income: Salary Slips and Form 16 (for salaried), last 3 years' ITR along with financials (for salaried, self-employed and professionals) and last 6 months' bank statements
• Additional Documents: Latest principal outstanding letter, list of documents from existing financier and repayment track record.

Also Read: List of documents required for home loan

Below-mentioned are the eligibility criteria for balance transfer of home loan.

• Your property must be ready to occupy or already occupied.
• You must complete at least 12 home loan EMIs with the current lender.
• There should not be any outstanding dues on your existing loan.

Also Read: Details on Loan Against Property

Home loan balance transfer process usually involves the following steps:

Step 1: Shop around for balance transfer offers with other lenders and compare their interest rates along with their features, benefits, processing fees and other charges.

Step 2: Weigh the cost-to-benefit of the balance transfer taking into account all costs associated with the transfer. Also, before going ahead, ensure that the benefits outweigh the costs.

Step 3: Once you get a better deal, negotiate the terms with your current lender to see if they can offer you the same or better loan terms.

Step 4: Once you decide to go ahead with the transfer, get an NOC (No Objection Certificate), foreclosure letter, loan repayment record and property documents from your existing lender.

Step 5: Start the home loan application process with the new lender by submitting the application form and all other required documents.

Step 6: Get a sanction letter and sign the loan agreement with the new lender.

Step 7: Now your new lender will pay off your outstanding home loan amount (that you had to pay to the previous lender) by transferring the amount to your previous lender through cheque/ demand draft.

Step 8: Once the previous lender receives the outstanding loan amount, they will cancel all the cheques and ECS and close your home loan account.

Also Read: Documents Required for Loan Against Property 

Individuals can calculate EMI of their home loan balance transfer amount manually using the home loan EMI calculation formula i.e. EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. However, as manual calculations are time-consuming and more prone to errors, individuals can save their efforts and time by using Paisabazaar's home loan EMI calculator.

The calculator is quick, accurate and convenient for anyone to use. It requires just a few loan details from users such as the loan amount, interest rate and tenure to calculate the EMI along with total interest cost and total amount payable.

Calculation of Home Loan Balance Transfer

The table gives you an illustration of how transferring your home loan can help you save on the total interest payable:

Also Read: Best Banks for Home Loan

Home loan borrowers must refinance their home loans for:

Lower Interest Rate

Many existing home loan borrowers might have availed home loans at higher interest rates due to their lower loan eligibility and poorer credit profile. But improvements in their credit profiles over the years can make them eligible for availing home loan at low interest rates.

Maximum Tenure

Many lenders allow balance transfer customers to opt for loan tenures longer than the residual tenure of their original home loan. Opting for extended loan tenure would result in lower EMIs and thereby, reduce their EMI burden. However, opting for this option would increase their overall interest costs.

Top-up Loan

Home loan borrowers opting for balance transfer also get a provision of top-up loan along with home loan balance transfer. The top up loan amount can be used for meeting any personal, professional and requirements without any end-usage restriction. The top up loan amount may vary from one lender to another depending on the overall loan amount eligibility of the balance transfer applicant.

Thus, existing home loan borrowers unable to avail top-up home loans from their existing lenders or are being charged higher interest rates for it can opt for home loan balance transfer.

Additional Benefits

Depending on your new lender, you may get to enjoy better loan features such as EMI waivers, zero processing fees, etc.

Is balance transfer a good idea for a home loan?

The key reason for transferring a home loan from one lender to another is to benefit from a lower interest rate provided by the new lender.

What is the maximum home loan amount that can be refinanced?

Your outstanding home loan amount is the maximum amount that you can refinance. However, if you require a loan amount higher than your outstanding home loan amount, you can avail top up home loan when applying for home loan balance transfer.

The maximum loan amount that can be availed through a top up loan would depend on the loan repayment capacity of the borrower and market value of your property.

Is there a limit to the amount I can transfer?

Yes. The maximum balance transfer amount is equal to the outstanding amount of the home loan.

How many times can I transfer my home loan?

You can transfer your home loan as many times as you wish. However, transferring your home loan multiple times can be a hassle as the process for home loan balance transfer is almost the same as that of a new home loan.

What is the lock-in period for home loan balance transfer?

In case of floating rate home loans, banks and HFCs do not have a provision for lock-in period for making the home loan balance transfer. Still home loan borrowers should contact their lenders or check their loan agreement for any lock-in related clause.

What processing fee is charged on home loan transfer?

Processing fees on transfer of home loans range from 0.5% to 1% of the loan amount.

How can I find out the total interest cost payable on your home loan amount?

You can calculate your total home loan interest cost by using home loan EMI calculator. All you need to do is to enter the loan amount, loan tenure and the interest rate into the calculator and then find out your EMI and total interest cost.

Does my current credit score affect my chances of successfully completing the transfer?

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.

Will my refinance be affected by the prepayment penalty?

Most banks and HFCs today won'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 one lender to another.

How much time will it take to transfer my home loan from another bank?

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 for the home loan to be transferred to the new bank.

What is a top up loan?

For instance, if the property value of your home climbs much higher from its original price at the time you took the home loan and you might require more finance for your home renovation. In this situation you can add to your loan. This is called a loan top up.

Can I get a top up on my loan along with the transfer?

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.

What is the HDFC home loan balance transfer interest rate?

HDFC home loan balance transfer interest rate starts from 8.55% p.a. The final interest rate will be calculated on the basis of various factors such as borrower's repayment capacity, loan amount, credit score, market value of the property, etc.

When should I not consider transferring my home loan?

You must not consider shifting your home loan if the total savings in the interest cost after deducting the various charges incurred during balance transfer is insignificant. The scope of interest cost savings is low if the transfer is made during the later stages of the home loan tenure.