A home loan balance transfer will help you reduce the interest component of the loan repayment. Lenders offer competitive interest rates to attract potential homeowners, and based on RBI’s monetary policies, home loan interest rates can potentially decrease. While new applicants can take advantage of the falling interest rates, those who’ve already applied for home loans might feel chagrined.
However, a home loan balance transfer allows you to change lenders, as you can move from your current lender to one offering better repayment terms. These terms can include lower interest rates or longer repayment periods. Before opting for a home loan balance transfer, you must utilise a home loan transfer calculator, and assess the amount you might save with the new lender. This cost-benefit analysis will help you decide whether you should go ahead with the home loan balance transfer.
Circumstances Under Which You Should Opt For Home Loan Balance Transfer
While a home loan balance transfer might look rewarding at the outset, you must consider several factors to decide whether transferring the outstanding loan amount will reduce the payable amount. You will have to pay processing fees while transferring the outstanding loan amount of your home loan, which can go up to 6% of the loan amount! Additional charges can include valuation charges, and you may end up paying more by opting for a home loan balance transfer.
For this reason, you should use a home loan transfer calculator, which you will find online. Here are a few reasons why you should opt for a home loan balance transfer.
- Lower Interest Rate: Whether you opt for an LIC home loan balance transfer, or go with a different lender, ensure you get a lower home loan interest rate. The difference between the interest rates offered by current and new lenders should at least be 0.25%, or more than 25 basis points.
- Longer Repayment Tenure: You can also opt for a home loan balance transfer if you want a longer repayment period, and your current lender refuses to increase the loan tenure. This could be because of various reasons – from a change in employment status to unexpected financial obligations.
- Get a Better Deal: If the new lender offers a better deal, such as lower interest, zero processing fees, or low prepayment or foreclosure charges, you can consider a home loan balance transfer.
Document Checklist
The new lending institution will ask for several documents before you can submit your loan application. It is crucial that you go through the list of documents the lender requires, which you can find on the lender’s website. Typically, you are required to provide the following documents while opting for a home loan balance transfer.
You must first notify your current lender about your intention by submitting a formal written application. You also have to request them to provide a letter of consent.
- No Objection Certificate (NOC)
The current lender must also issue a No Objection Certificate (NOC), stating that the financial institution does not object to the transfer of your home loan – and the outstanding amount to the new lender.
Your current lender must also provide you with the loan agreement or sanction letter.
Another important document you need to obtain is the foreclosure letter. This letter declares that your existing home loan is foreclosed on a particular date, and no outstanding amount is pending. You will receive this letter once the new lender pays the principal outstanding home loan amount to the current lender.
Your home loan statement contains the loan details, such as your EMI and repayment history. The statement also comprises the outstanding home loan amount. You can collect the home loan statement from your existing lending institution.
You should also request your existing lender return the property documents, which you must submit to the new lender.
You must collect the pending post-dated cheques you previously submitted to your existing lender while obtaining the loan.
You have to provide your KYC documents to the new lender. These documents include:
- PAN Card
- Aadhaar Card
- Driver’s License
- Voter ID Card
- Employment ID Card issued by NREGA
- Passport
- Aadhaar Card
- Driver’s License
- Voter ID Card
Your financial documents help the new lender verify your annual income and repayment capacity. You must submit the following financial documents while applying for a home loan balance transfer.
- Form 16
- Salary slips for the previous six months
- Bank statement for the previous six months
You should also provide the following employment documents as proof of employment.
- Your appointment letter or employment contract
- Property Related Documents
To verify the purchase of your property, you must submit the following list of documents.
- Property purchase documents
- No Objection Certificate from the property developer or the housing society
- Registration certificate
- Stamp duty papers and the payment receipt
Apart from these documents, you may also have to submit passport-size photographs, and the original application form submitted to the existing lender. The documentation requirement varies from one lender to another, and you can visit the lender’s website to know the document checklist.
Find the Right Lending Institution
You must find the right lender that offers the best repayment terms, and you can check the EMI and interest burden by using the home loan transfer calculator. Furthermore, each lender has specific documentation requirements. For example, if you opt for the LIC home loan balance transfer, you can visit LIC’s official website, and check the list of documents needed for a home loan balance transfer.
Once you understand the requirements properly, you can start with your home loan balance transfer application.