A home loan balance transfer is a facility that allows a borrower to transfer the outstanding balance amount of an existing home loan from one lender to another.
Individuals prefer to change their lender midway when they find lower interest rates or better terms and conditions.
Borrowers need to follow a series of simple steps in order to transfer their home loan from one financial institution to another.
To avail home loan balance transfer, follow these steps:
Borrowers need to scrutinise prospective lenders initially. They need to compare interest rates offered by various lenders, the terms and conditions, and select the most suitable option. Finalising a lender will allow borrowers to move ahead with the transfer process of that specific financial institution.
Individuals can apply for a transfer of home loan to a new bank or lender in the following ways:
The next step for individuals is to contact the existing lender and inform the company about the decision to transfer the loan amount to a new lender.
Borrowers must obtain all important documents held by their existing lender, like property papers, land deeds, etc.
Individuals are required to obtain a consent letter from the existing lender. The borrowers’ outstanding loan amount and property details should be mentioned in the letter.
The next step is to apply for foreclosure of the existing loan account. The new lender will pay off the outstanding loan amount after receiving a consent letter from the existing financial institution. After this, the new lender will get possession of property documents, and the old account will be permanently closed.
A borrower must sign a fresh loan agreement with the new lender. All terms and conditions, including interest rate, repayment tenure and outstanding loan amount, are to be mentioned in the agreement.
Here are some benefits associated with a home loan balance transfer:
Individuals can switch from one bank to another when the latter offers a significantly lower rate of interest than the former. This reduced interest will ease the financial burden in the form of lower EMIs.
Many lenders offer top-up loans to select customers in advance. This provides borrowers with access to additional funding at a lower interest rate. Individuals can use additional funds for financial emergencies.
Borrowers may receive a better customer experience if they transfer their existing loan to a new lender. Loan perks, an advanced user interface will add to their improved experience.
Some points that one can consider before opting for a home loan balance transfer are as follows:
Borrowers can take into account foreclosure charges, processing fees, and other costs imposed by existing and new lenders while deciding on the transfer.
The interest rate offered by the new lender should be lower than the old one. If it is not the case, it may defeat the purpose of the loan transfer.