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Home Loan Balance Transfer Charges: A Wise Financial Move?

By IIFL Home Loans | Published On Oct 20 2023 10:06 AM 1 min read 163 views 437 Likes
IIFL Home Loans

If you are a homeowner in India with an existing home loan, you've probably heard about the option of transferring your home loan from one bank to another. This financial move, known as a home loan balance transfer, can be a powerful tool to help you save money on your home loan. However, it's essential to understand the various charges and circumstances involved before deciding whether it's worth making the move. Learn more about this with IIFL Home Loans!

What Are The Home Loan Balance Transfer Charges in India?

Before diving into whether a home loan balance transfer is beneficial, let's take a closer look at the various charges associated with it:

Home Loan Balance Transfer Charges
  • Home Loan Pre-closure Charges: When you decide to transfer your home loan, you may need to pay pre-closure charges to your current lender. 

  • Processing Fees: The new lender will charge a processing fee for sanctioning your home loan balance transfer. These fees can vary, so it's crucial to inquire about them.
  • Transaction/Legal Handling Fees: There are charges associated with legal and administrative processes, including document preparation, due diligence, and compliance checks, incurred during the transfer of a home loan from one lender to another. 

Here’s a brief look at home loan interest rates and other charges at IIFL Home Loans.

Processing fees

Up to 1.75%

Collateral Evaluation Charges in Home Loan Non-APF

3000

Late Payment charges:

18% per annum of outstanding EMI

Foreclosure charges :

Nil*

Transaction/Legal Handling charges

  • 2500 for loans up to ₹5 Lakh

  • 100 for loans greater than ₹5 Lakh 

*Note - Please visit IIFL Home Loans’ rates and charges for a detailed overview.  

Now that you know what it’s going to cost you to transfer your home loan, the next obvious question to ask is - does it make sense for you to make a move right now or do you stand a chance to lose more money in the process?

When Does It Make Sense to Opt for a Home Loan Transfer?

You can base your decision on a few important factors, such as:

1. Calculate costs versus benefits

Calculate how much you will save with the reduced interest rate offered by the new lender. The home loan prepayment penalty charged by the current lender may eat into the benefits of the lower interest rate offered by the new lender. If you save more than the transfer costs associated, then it’s a green signal. 

Calculate costs versus benefits of balance transfer

Home loan prepayment charges are only levied on fixed interest rates. If you are on a floating-rate home loan, you don’t have to worry about this. But if not, it can mean a sizable expense. 

2. Consider the remaining tenure

A follow-up to the previous point is that if you are almost nearing the end of the tenure and the outstanding amount is not significant, the balance transfer charges might negate any benefits. It is, therefore, important to research more or consult experts for a detailed review of your situation.

3. Ensure it isn’t a limited-period offer

Transferring your home loan to a lender offering lower EMIs, longer tenure, or reduced processing fees, can provide you with more financial flexibility and reduce your monthly financial burden. While these may seem favourable loan terms right now, it may just be a short-time offer. If it is, do consider what happens once the offer ends. Consult both parties about the terms and conditions and take your time. 

4. Negotiate with your current lender

You might also want to consider negotiating interest rates with your current lender. This is going to save you a lot of trouble. If you have a good credit score, you could use it to your advantage and request a lower interest rate. 

Reach out to IIFL Home Loans for guided help throughout your move. For more clarity on how your EMI changes with new interest rates, use IIFL Home Loans’ EMI Calculator

To Sum Up

A home loan balance transfer in India can be a wise financial move if it results in reduced interest rates, better loan terms, or improved customer service. However, it's essential to carefully consider the associated charges, such as prepayment charges for home loans, before making the decision. By analyzing your specific circumstances and conducting a cost-benefit analysis, you can determine whether a home loan transfer is worth making. In many cases, it can lead to significant savings over time, making it a prudent choice for homeowners seeking financial relief. Get in touch with IIFL Home Loans for competitive interest rates and flexible terms on home loans and balance transfers!

FAQs

1. Why should you consider a home loan balance transfer?

You should consider a home loan balance transfer to potentially lower your interest rate and reduce your monthly EMI payments, saving you money over the long term. It's a smart financial move if it results in improved loan terms and increased affordability.

2. Who is eligible for a home loan balance transfer?

The standard criteria to be eligible for a balance transfer are:

  • You should have paid off loan EMIs for at least 12 months without defaulting.

  • Your property should be registered. 

  • You should have a copy of the approved plan if the property is under construction.

3. Is there a limit to the balance transfer amount?

IIFL Home Loans has not placed any limit on the amount of balance transfer for home loans. Please check with the lender to confirm the maximum amount you can avail.

4. Are home loan balance transfer charges the same across lenders?

No, the charges vary across lenders. 

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