Housing loan is a long term commitment which requires tremendous patience and a large sum from your monthly income which goes off as the EMI. One may tend to feel the loan as a burden over the course of loan tenure because of the high rate of interest charged. A home loan balance transfer is the utmost solution of sailing through the home loan tenure by shifting from the present lender with the high rate of interest to another lender who has a low rate of interest on offer.
A home loan balance transfer is also known as refinancing. It is an excellent option if one wishes to save on some money that would have gone as interest. As a borrower, it is, however, necessary to get to know all the details and understand the process of the home loan balance transfer.
Why should one opt for a home loan balance transfer?
The main and foremost reason to opt for a home loan balance transfer is to ease out the interest rate burden so that you can save some money. However, the switch should be made with utmost care keeping in mind the pros and cons of it. The main goal is to reduce the monthly EMI and interest rate.
In order to get the housing loan approved, it is important to comply with the eligibility criteria as defined by the new lender to get their home loan balance transfer application approved. Here are generic eligibility criteria that are followed by most lenders:
- A salaried and self-employed individual with the capacity to repay the loan amount.
- A Citizen of India
- Age should not be less than 21 or more than 60
- A proven and continuous income source
- Continuity of income. Consistency in the job with the corporate or business continuity in case of self-employed
- Credit score as per the eligibility criteria of the respective lender. Most lenders would not offer loan to individuals with a low credit score.
Similar to home loans, the borrower needs to submit a few documents along with the home loan balance transfer application. Some of the commonly needed documents required by the financers are as follows:
- Recent Photograph
- Completed Application Form
- Last three Month’s Salary Slip
- Bank Statement of Last 6 Month
- Valid Identity Proof
- Valid Address Proof
- A valid and authorised Age Proof
- Business Registration and Continuity Documents for Self-Employed Professionals
- Previous Home Loan Statement along with accompanied Bank Statement
- Documents of the concerned property
Process of Home loan Balance Transfer:The process of home loan balance transfer comprises of steps mentioned below:
Step 1: Compare and Evaluate Benefits
Before applying for a home loan balance transfer, analyse its viability to know whether its truly worth it or not. Some key pointers which must be kept in mind during refinancing are:
- Your current lender will levy prepayment charges on the home loan with a fixed rate of interest. This is not so in case of a floating rate of interest. Thus, refinancing is a better deal in the latter case.
- Home loan balance transfer with longer loan tenure signifies lower monthly EMI and more benefits.
- It is advisable to ask for all other hidden charges so that you don’t end up paying more than what you are actually paying currently.
Step 2: Obtain an NoC from the existing lender
The borrower needs to get a No Objection Certificate (NOC) from the current lender. Also get hold of foreclosure letter, payment history and other documents kept with the bank.
Your current lender may negotiate and offer you a reduced rate of interest. Thus, it is advisable to take a calculated decision.
Step 3: Apply with the new Lender
Once you are sorted with all the documents from your current lender, apply for the home loan balance transfer with the new lender. Submit all the requisite documents. It is advisable to compare different lenders before finalising on one. Fintech enablers like LoansJagat offer an excellent platform wherein one can compare different lenders of their offerings in terms of interest rate, loan tenure, fees, charges, loan amount, EMI etc. On account of your requirements, you can zero in on the lender.
Step 4: Get Credit Approval
The new lender will work on their end to check your credit history, eligibility and validating your documents before approving the loan application.
Step 5: Complete Documentation
The new lender may ask for some additional documents to finalise the refinancing deal and clearing your outstanding dues with your earlier home loan provider.