How to Transfer Home Loan from One Bank to Another?

If you’re stuck with a high-interest home loan, switching lenders through a home loan balance transfer might be your smartest financial move. It is an effective way to reduce your interest rate burden and enjoy better debt conditions to transfer a home loan from one bank to another.

Whether you are targeting a low EMI, better service, or additional features, a home loan transfer can help adapt the repayment journey. Let's understand how the process works and the factors you should consider before you proceed.

What is a Home Loan Balance Transfer?

A home loan balance transfer involves moving your existing loan from one lender (bank or NBFC) to another, typically for a lower home loan interest rate or better service. The new lender pays off your outstanding loan amount to your current lender, and you start repaying the new lender under revised terms.

This is especially beneficial if:

• Interest rates have dropped since you took out your loan
• Your financial profile has improved
• You want to consolidate loans or avail a top-up loan
• Your current lender’s service is unsatisfactory

Key Benefits of a Home Loan Transfer

Some advantages of a home loan transfer are:

1. Lower Interest Rates

   The most common reason borrowers consider a transfer is to take advantage of reduced interest rates. Even a small reduction can result in significant savings.

2. Top-Up Loan Facility

   Most NBFCs and banks offer the option to avail of a top-up loan on the transferred home loan. It can be used for renovation, education, medical expenses, or other needs.

3. Improved Loan Terms

   You can renegotiate terms such as tenure, repayment mode, and even request flexible EMI options based on your current financial position.

4. Better Service and Digital Management

   Switching to a lender like IIFL Home Loans provides access to superior customer service, quick processing, and convenient online management tools.

5. Lower EMI Burden

   With lower interest rates, your monthly instalments are reduced, improving your monthly cash flow.

Documents Required for Home Loan Transfer

Here's a quick checklist of all the documents you'll need:

Personal KYC:

• Aadhaar Card
• PAN Card
• Passport (for NRI applicants)

Income Documents:

• Salaried: Salary slips, Form 16, bank statements
• Self-employed: ITRs, business proof, CA-certified financials

Property Documents:

• Sale deed
• Possession letter
• Approved building plan
• Occupancy certificate

Loan Documents:

• Foreclosure letter
• Loan repayment track record
• Sanction letter from the existing lender

Step-by-Step Process of Home Loan Transfer

Here’s how to transfer a home loan from one bank to another:

Step 1: Evaluate Your Current Loan Situation

Before initiating the transfer, analyse your:

• Current outstanding principal
• Existing interest rate
• Remaining loan tenure
• Processing fees from the new lender
• Prepayment penalties or foreclosure charges

Step 2: Compare Lenders and Offers

Next, research lenders who offer attractive interest rates and services. Look at interest rates, processing and legal fees, top-up loan options and customer service track record.

Step 3: Apply with the New Lender

Once you’ve selected a lender, submit a loan transfer application.

Step 4: Loan Approval and Verification

The new lender will verify your creditworthiness, evaluate your income and property documents, and assess your repayment history. If satisfied, the lender will sanction your loan transfer.

Step 5: Foreclosure of Existing Loan

Once your new loan is sanctioned, the new lender will issue a cheque or a demand draft in favour of your existing lender for the outstanding amount.

Step 6: Loan Disbursal and EMI Start

After the closure of the old account, the new lender disburses the loan and provides you with a new repayment schedule. Your EMI under the new terms starts from the next cycle.

Factors to Consider Before a Home Loan Transfer

Before transferring your home loan to another lender, keep the following crucial factors in mind:

• Timing of transfer

  Balance transfer makes more sense in the early years of the loan tenure when interest outgo is higher. Transferring in later years may not yield significant savings.

• Credit score

  Always maintain a good credit score (ideally above 700) for a hassle-free transfer process. A poor score might lead to higher interest or rejection.

• Top-up loan options

  If you foresee a financial requirement shortly, choose a lender that offers home loan top-up facilities alongside the transfer.

• Cost of transfer

  Home loan transfer from one bank to other charges are typically incurred under multiple heads, such as for processing fees, legal charges, valuation fees, and administration.

• Tenure adjustment

  Choose whether you want to reduce the EMI or the tenure. Shortening the loan tenure is advisable to save more on interest.

Wrapping Up

It’s wise to transfer a home loan to another bank with the right lender and at the right time to maximise benefits like lower interest rates and better loan terms. It helps you reduce the overall cost of borrowing, manage EMIs better, and even access additional funds through top-up loans.

However, it is essential to consider all associated costs and compare offers carefully before making the switch. With NBFCs like IIFL Home Loans offering tailored solutions, low documentation requirements, and flexible repayment options, the loan balance transfer process has become more streamlined. This makes it more accessible and faster than ever.