Have you taken a home loan and now feel stuck with higher interest rates? No need to worry. Home loan balance transfer gives you the option to switch to a new lender who charges a lower interest rate. This blog will guide you through the process of a home loan balance transfer.
Let's start with understanding Balance Transfer- It is basically a process of getting the current loan transferred from one financial institution to another.
The tenure of a housing loan is long-term, usually between 10-30 years. Even though a scheme looks lucrative in the beginning, there can be instances when you feel uncomfortable with rigid interest rates, hidden charges, stringent compliances, and unfavourable loan terms.
As a saviour, a home loan balance transfer can reduce your excess EMI baggage and make your repayment more affordable. Whatever be the case, you can select a viable new lender according to your preferences.
So, here is the step-by-step process to apply for a home loan balance transfer with the new lender:
Once you have chosen the new lender, you need to inform your current lender about it. You are required to submit the following to the new lender until the old loan is paid off:
List of loan documents held by the current lender, and
On receiving the documents, you can apply for the balance transfer. You need to submit the following documents along with your transfer application:
Statement of the housing loan with current lender showing regular loan repayments
In balance transfer cases, the cheque will be drafted favouring the old lender for the loan sanctioned amount. New Lender will draft the cheque basis the foreclosure letter received from the previous lender.
Once the previous loan is closed, property documents are released by the lender. Along with this, a No dues certificate is also issued in your name. It states that no amount is due against your old loan.
You need to deposit your property documents to the new lender who creates a valid mortgage on your property.
Evidently, a balance transfer requires some time and effort on your part. So, why should you go through all this pain? Let's talk about the benefits that you can expect from a home loan balance transfer.
Commonly, home loan customers switch to lenders who provide favourable loan terms and interest rates. Having said that, are these the only benefits of a home loan balance transfer? Here is the list of benefits that you can derive if you opt for it:
Lower Interest Rates:The new lender can charge lower interest rates. A reduction in interest charge can reduce your monthly instalments leaving space for more savings.
Flexible Interest Rates:The new lender might apply interest based on the RBI's benchmark lending rate. In this case, whenever RBI reduces its benchmark, the benefit is passed on to you by means of interest rate reduction.
Longer Tenure:The new lender can allow you to stretch the loan tenure further so that your EMI is reduced, and you can save more for your monthly expenses.
Increased Loan Amount:The new lender may allow a higher loan amount at your current income levels. In this case, you can get additional funds for constructing your house.
Reduced Compliances:Unlike your current lender, the new lender might ask for lesser compliances and avoid a complex documentation process.
No Hidden Charges:Where the old lender might have misrepresented the loan charges, the new lender can offer transparency with no hidden costs.
Once you are certain, prepare your documents according to the steps above and research the benefits in advance to benefit from the best option. You can apply for a home loan balance transfer with IIFL Home Loans to enjoy lower interest rates and a host of other benefits.