Seamless Transfer: Home Loan Balance Transfer Process Unveiled

Over the last few years, one of the most beneficial facilities that lenders have started offering loan borrowers is that now individuals repaying a home loan can transfer the remaining amount on their loan to another lender at any point in their home loan tenor by opting for the balance transfer facility. Individuals on floating interest rates need not pay their current lender any fee to foreclose their loan and transfer it to another lender. Borrowers on fixed interest rates may be charged a penalty. 

In most cases, borrowers opt for this facility when another lender is willing to offer them a lower rate of interest. However, in some cases, people also opt for the home loan balance transfer facility when they wish to avail themselves of a top-up loan or want to change their interest rate regime or loan tenor. Many people also choose to transfer their loans to another lender in expectation of better customer service. If you are planning to avail yourself of this facility, you must know what the home loan balance transfer process entails. 

Home Loan Balance Transfer Process Unveiled 

1. If you choose to transfer your loan to another lender, the first thing you will have to do is inform your current lender of your desire to do so. Write a letter stating your desire and requesting the home loan NOC from your current lender along with a copy of the documents you had submitted at the time of sanctioning of the loan.

2. If your lender agrees to your request, they will release the NOC along with your repayment history as well as a copy of all the documents you submitted at the time of sanctioning the home loan. 

3. With the NOC letter and these documents in hand, you can apply for a top-up loan to your new lender. 

4. Once your new lender receives your loan application, they will verify all the information provided by you and if you meet all the quality checks, your new lender will pay off your old lender by sanctioning you a loan. 

5. After this, your old lender will close your loan account with them. They will send all the original property papers and other documents you submitted to them to your new lender and you will now have to pay your loan EMIs to your new lender. 

This is the entire home loan balance transfer process and it can take up to a few weeks for the entire process to complete. So, plan your timelines accordingly.

If you are planning to opt for a home loan balance transfer, there are a few other things you must keep in mind. To start with, as previously mentioned, if you are on floating interest rates, your current lender cannot charge you a penalty for foreclosing your loan. However, your new lender will charge a home loan balance transfer fee. Lenders charge between .5% to 2% of the home loan amount as the balance transfer fee. Thus, the decision to opt for a home loan balance transfer must be taken after doing a cost-benefit analysis. If you are opting for a transfer to benefit from a lower rate of interest, deciding in favour of a balance transfer would prove most beneficial if you opt for this facility during the early years of the loan tenor or when a considerable portion of the interest is yet to be paid. If the remaining tenor on your home loan is 10 years, make sure there is at least a 25bps difference in the new and old interest rates if you truly want to save some money.