Home loans worked differently until a few years ago. One had no option but to stick to the loan partner they had chosen. However, a few years ago, the Reserve Bank of India (RBI) passed a new rule that allowed home loan borrowers repaying a loan on floating interest rates to prepay or foreclose their loan whenever they want without paying any penalty. This rule also forms the basis of home loan transfers.
What is a Home Loan Balance Transfer?
The home loan balance transfer is a new facility offered by lenders operational across the Indian lending market these days. This facility not only allows good and reliable lenders to win over new customers but it also makes it possible for existing home loan borrowers to switch to better loan terms and conditions, especially lower home loan interest rates and save more through the tenor of one’s home loan. The home loan transfer facility makes it possible for existing home loan borrowers to close their loan accounts with their current lender, without paying any fee if they are on floating home loan interest rates, and transfer the remaining balance on their home loan or the loan amount they are yet to repay to another lender willing to refinance the same loan at more beneficial loan terms and conditions.
Home loan borrowers must keep in mind that they can close their existing loan accounts without paying any prepayment or foreclosure fee only if the loan borrower has chosen to repay the loan on floating interest rates. Individuals on fixed interest rates are asked to pay a penalty if they opt for the same facility. Further, borrowers must know that not everyone qualifies for a home loan transfer.
Most lenders consider home loan balance transfer requests only from those individuals who have an excellent CIBIL score, and have not missed more than one EMI payment over the past year (some lenders ask for an absolutely clean repayment history with no cases of missed EMIs and prepayment due dates), and an income that allows the loan borrowers to comfortably afford their new home loan balance transfer interest rate EMIs. There may be other considerations as well. We have established the basics of a home loan transfer. Let us now walk the readers of this article through the details of the home loan transfer process to help them be better prepared for the process.
Home Loan Balance Transfer Process: Everything You Need to Know
If you are planning to apply for a home loan balance transfer, you must read extensively about the home loan balance transfer process as it will allow you to navigate the entire process easily. So, here is what the home loan balance transfer process involves:
- To start with, if you want to be considered for a home loan transfer by another lender of your choice, the first thing you must do is inform your current lender of your desire to do so. While most lenders do not have any issues with home loan transfers, if your current lender has any rules regarding home loan balance transfers in your home loan offer letter, a balance transfer can become difficult. This is why all home loan borrowers are requested to sign the final home loan letter after carefully reading every point and even seeking the advice of a legal expert.
- After you have informed your current lender and they have agreed to your request for a home loan balance transfer, they will release all the required documents for home loans that you had submitted at the time of applying for the loan and a copy of your repayment history. Your repayment history is important — missing too many EMI payment due dates can make one ineligible for a home loan balance transfer.
- After you have collected all the required documents, submit them to your new lender. Your new lender will take some time to go through all the documents and if all seems fine to them, they will release the home loan offer letter.
- After you sign the new home loan agreement, your lender will pay off your current lender. Once this is done, your old lender will close your loan account with them. At this point, the home loan balance transfer is also considered complete and the borrower has to start paying home loan EMIs to their new lender.
The home loan balance transfer facility is important. It can prove to be highly beneficial, especially if you are unhappy with the home loan interest rate at which you are currently repaying your home loan and think is too high. With the home loan balance transfer facility, you can easily switch lenders and enjoy a lower home loan balance transfer interest rate. You can even avail yourself of a top-up loan with no end-use restrictions and take care of other responsibilities and needs you may have.
