Home loan balance transfer means transferring your existing home loan to another lender at a lower rate of interest. The reduced rate of interest helps borrowers save on EMI as well as interest outgo on a home loan. Where should you apply for a home loan balance transfer and when should you do it to maximize? Read all these and more on this page.
A home loan balance transfer calculator is the tool that can help you make the right decision. This calculator takes into account the existing home loan details like the loan amount, the rate of interest, tenure, the total EMI paid, and the name of the bank from which you have an existing home loan. On the basis of these details, you will get the options available in the market where you can transfer the loan.
Below is an example showing the savings you can make if you balance transfer your home loan after 2 years.
|Bank||Interest Rate (p.a.)||Loan Amount||Tenure||Total Interest Outgo Payment||Total Savings = (A-B)|
|Existing||10.00%||INR 30,00,000||20 Years||INR 69,48,156 (A)||INR 8,96,068|
|New||8.75%||INR 28,95,508||18 Years||INR 57,59,522 (B)|
Where to Apply for a Balance Transfer?
You can transfer your existing home loan to another bank without any hassle. All banks and NBFCs provide a home loan balance transfer and top-up facility. Have a look at the top lenders where you can apply for a balance transfer:
- State Bank of India (SBI)
- Bank of Baroda
- HDFC Limited
- PNB Housing Finance (PNBHFL)
- LIC Housing Finance (LIC HFL)
- Axis Bank
- ICICI Bank
- Kotak Mahindra Bank
What are the benefits of a Balance Transfer?
A home loan balance transfer can prove to be very beneficial for a borrower in the current times as the interest rate has come down drastically in the last 6 months or so. The home loan rate has now fallen to 7%-8% on average, giving you lucrative balance transfer opportunities. However, there are a few things that must be kept in mind when it comes to balance transfer. You must check the EMI difference and also the actual saving you can do by switching the loan. Let us have an overview of the benefits:
- Lower interest rates so lower EMIs
- Saving on total interest outgo
- Additional Top-Up facility
Home Loan Balance Transfer and Top-Up
When it comes to home loan transfer, Top-up is also a common demand among the borrowers. Since the new rates are lower than the existing one, the extra money you can get through Top-Up will not cost you much. You can use this money for any personal or business needs. Having said that, there are many banks and NBFCs that provide balance transfer on home loan along with the top-up facility of up to 100% of the original loan amount at affordable rates.
When Should You Go for a Home Loan Balance Transfer?
A home loan balance transfer yields the most when you do it at the right time. But not many know the right time for it. You will save more when the loan has quite a lot of time left compared to when the loan is just a few years away from being over. So, in a 20-year home loan, the ideal time for balance transfer would be within 10-12 years of the repayment tenure. The sooner you do, the better it will be for you. In case you do it after paying EMIs for 15 years or so, the savings will not be much. The interest rate offered by the new lender on a balance transfer should be at least 0.25%-0.50% lower than the one charged by the existing lender. In case you are doing a balance transfer with not many years left for the loan to be over, the interest rate difference should be much beyond 0.25%-0.50% so that you can save a substantial amount of money.
What are the documents required for Balance Transfer?
The process of home loan transfer includes research on which lender is going to be best for you and then submitting the required documents as mentioned below:
- Balance transfer form
- Last 6 months bank statement
- Last 2 months salary slip
- Last 2 years ITR copy
- Form 16
- NOC from your builder/society
- Proof of ownership
Fees and Charges
At the time of transferring the loan, you have to consider the overall cost of your loan. In simple terms, you must check the processing fee, the stamp duty, legal charges, valuation fee, technical charges and other allied charges that your new bank would charge on the transferred loan amount.
Generally, banks charge 0.50% to 1% fee or standard processing fee of ₹5000 on the transfer. The stamp duty would cost around 0.20%-0.50% on the mortgage in selected locations. However, State Bank of India has zero processing fees on balance transfer for loan disbursed till December 31, 2018.
Benefits for Women Borrowers on Home Loan Transfer
There are many benefits for women borrower or co-owner of the property. Let us have a look at the advantages that a woman borrower can get:
- Lower interest rates
- Concession on the stamp duty
Things to Remember
A home loan is a long-term commitment and hence while choosing the lender you have to be very careful about what and how this new bank is beneficial for you. Having said that, there are certain things that you must need to consider. So, have a look at the things that you must remember before finalizing your deal:
- Compare the deals
- Calculate the total interest outgo on existing loan as well as on new loan
- Total cost of the process
- Charges included in the process
- Check if the rate offered is fixed or floating
- How much is the total saving