Let's say, you take a Home
Loan from a bank with a rate of interest at 14%. A few years later, you
realize, you're paying a really high rate of interest. What do you do? You request your bank
for a reduction, but there's no response. This is where a home loan balance transfer, comes
in useful. In a balance transfer, your outstanding loan gets transferred to another bank or
lending institution, for a better rate of interest. The principle is credited to your old
bank and you pay off the home loan. You're now paying a new EMI amount, at a more
competitive rate.
Features and benefits of Balance Transfer
Lower Interest Rate:
Many existing home loan borrowers might have availed home loans at higher interest rates
due to their lower loan eligibility and poorer credit profile. But improvements in their
credit profiles over the years can make them eligible for availing home loan at low
interest rates.
Maximum Tenure:
Many lenders allow balance transfer customers to opt for loan tenures longer than the
residual tenure of their original home loan. Opting for extended loan tenure would
result in lower EMIs and thereby, reduce their EMI burden. However, opting for this
option would increase their overall interest costs.
Top-up Loan:
Home loan borrowers opting for balance transfer also get a provision of top-up loan along
with home loan balance transfer. The top up loan amount can be used for meeting any
personal, professional and requirements without any end-usage restriction. The top up
loan amount may vary from one lender to another depending on the overall loan amount
eligibility of the balance transfer applicant. Thus, existing home loan borrowers unable
to avail top-up home loans from their existing lenders or are being charged higher
interest rates for it can opt for home loan balance transfer.
Additional Benefits:
Depending on your new lender, you may get to enjoy better loan features such as EMI
waivers, zero processing fees, etc.
Eligibility Criteria for Home Loan Balance Transfer
Each lender has its own criteria for Balance Transfer.
However, in general, they could be:
- Your property must be ready to occupy or already occupied
- You must complete at least 12 home loan EMIs with the current lender
- There should not be any outstanding dues on your existing loan
Get loans at lowest Interest rate in India
What are the documents required for an Balance
Transfer?
For Salaried:
- KYC Documents: PAN card, Aadhaar Card and Proof of Residence
- Proof of Income: Salary Slips and Form 16 (for salaried) along with last 6 months’
bank statements
- Additional Documents: Latest principal outstanding letter, list of documents from
existing financier and repayment track record
For Self-Employed:
- KYC Documents: PAN card, Aadhaar Card and Proof of Residence
- Proof of Income: last 3 years’ ITR along with financials (self-employed and
professionals) and last 6 months’ bank statements
- Additional Documents: Latest principal outstanding letter, list of documents from
existing financier and repayment track record
Frequently Asked Questions
The key reason for transferring a home loan from one lender to
another is to benefit from a lower interest rate provided by the new lender.
Yes. The maximum balance transfer amount is equal to the outstanding
amount of the home loan.
Most banks and HFCs today won't have a prepayment penalty in the
first place. But if your bank has it, then you can ask your new lending bank to
take it into account. This will vary from one lender to another.
Yes, depending upon your eligibility, the loan issuer can offer you
the option to top up on the home loan to be transferred to the new bank but
there may be processing and legal charges applicable.