The term ‘Home Loan Balance Transfer’ simply means transferring your existing home loan to another bank. The borrower opts for a home loan transfer when there is another bank that is offering a lower rate as compared to the existing one. Having said that, there are still some terms and conditions that are considered by the bank. There is a cost involved in the process which must be kept in mind during the transfer procedure.
Benefits of Home Loan Transfer
A home loan balance transfer can prove to be very beneficial for a borrower especially after the demonetization. Since, the home loan rates have gone really down post demonetization, any borrower who had taken a home loan before the rate cut can switch to a new bank now and enjoy paying lower EMIs. However, there are few things that must be kept in mind when it comes to balance transfer. You must check the rate 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
- Additional Top-Up facility
Home Loan Balance Transfer Calculator
A home loan balance transfer calculator is the tool that can help you make the 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, you will get the options available in the market after which you can decide where do you want to transfer your home loan.
Below is an example showing the difference between the EMI and the total savings on the balance transfer after 2 years.
|Bank||Interest Rate (p.a.)||Loan Amount (₹)||Tenure (in years)||EMI (₹)||Yearly Payment (₹)||Total Saving on Yearly Payment (₹)
|Existing (A)||10.75%||30,00,000||25||28,863||3,46,353 (A)||26,946|
|New (B)||9.65%||29,47,040||23||26,617||3,19,407 (B)|
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 on affordable rates. For example, ICICI Bank provides Home loan balance and Top Up facility wherein you can get additional top-up loan amount up to 100% of the original loan amount. Other than this, HDFC Ltd., Axis Bank, and State Bank of India (SBI) are some of the top banks providing home loan balance transfer along with Top-Up.
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, the prepayment and late fee charges are subject to change from one lender to another.
Benefits for Women Borrowers on Home Loan Transfer
When it comes to home loans, there are many benefits that 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
Documents Required for Home Loan 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
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
Role of Banks in Loan Transfer Process
Considering the fact that the transfer is beneficial for the borrower, it is important to know why do banks accept the balance transfer. Well, banks don’t just directly accept the application until and unless the customer has a good credit score. Having said that, if the customer has made the previous payments properly and is now willing to switch the loan, banks help their customers in reducing their financial burden. So, the customers who fulfill the eligibility criteria, banks will accept the home loan transfer applicant without any hassle.