Introduction
Choosing the right lender for a home loan can be tricky sometimes. What if, later on, you might come across a better home loan scheme that you might want to opt for instead? Well, the good news is that you are free to transfer to a different lender.
There are a plethora of reasons why you may want to change your home loan scheme to a different one. One such example that comes to mind is getting a lower rate of interest as compared to the current loan plan you have.
In this article, we will be sharing a simple process on how to proceed with a home loan balance transfer. But before we start, let us understand more about home loan balance transfer.
What is a Home Loan Balance Transfer?
A Home Loan Balance Transfer, also known as Home Refinancing, is serviceable when you want to switch your home loan from your parent bank to another bank. The other bank may offer you a more flexible repayment option, get you a lower rate of interest, a more enhanced service, improved tenure or a more compensated facility. Once you’ve decided to change to a new bank, your new bank pays an outstanding amount to your previous (parent) bank.
Now that we have a gist of what a home loan balance transfer is, read more to find out how the transfer process works.
Here are the 5 key points that will cover the transfer process step-by-step:
1. Informing bank transfer:
You must submit a form or write a letter (whichever is required by the bank) to the lender informing about the transfer of loan. Before initiating a Home Loan Balance Transfer with the new bank, remember to jot down the exact reason you want a transfer.
2. NOC or Consent Letter:
No objection certificate (NOC) or a consent letter will be handed to you by your parent bank. This is an important document that needs to be submitted to your new lender. It is essential to apply for a transfer.
3. Submitting your Documents:
You will have to submit a few documents required by the bank along with the NOC. These documents include KYC, property papers, interest statements, and loan balance sheet. These must be submitted to the new lender you decide to go ahead with.
4. Waiting for a confirmation:
After you’ve submitted these documents to your new bank, wait for the confirmation from your previous lender, who will confirm the closing of the account with them. This validates the end of your loan contract with them.
5. Conclude all the payments:
Finally, to end the contract with your old lender, settle out all the dues that are left to be paid off and begin afresh with your new lender by remunerating the next month’s EMI.
But wait, what about the Home Loan Balance Transfer interest rate & the processing fee?
Well, there are obviously some amounts to be charged for the loan balance transfer depending on the type of loan. Some banks will charge 1% - 4% penalty fee for fixed-rate loans but not on floating-rate loans. Although, it is better to switch at an early stage when the Home Loan Balance Transfer interest rate is higher than the principal amount itself.
What are the eligibility criteria that have to be followed to get a home loan bank transfer? Let’s find out.
- Indian citizen residing in India
- Salaried applicant must be between the age of 23 to 62 years
- Self-employed applicant must be between the age of 25 to 70 years
- A CIBIL Score of 750 and above is a must
Documents required:
- KYC documents: identity and address proof (PAN card, Aadhaar card)
- NOC: consent letter by the previous lender
- Proof of income: for salaried applicants, salary slips of the previous 3 months or form 16
- P&L statements for self-employed applicants
- Account statements for more than 6 months
- Proof of residence
- Latest passport size photograph