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How to Transfer Home Loan from One Bank to Another?

05 April 2022
3 minutes

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. 

Steps to Transfer Home Loan

To avail home loan balance transfer, follow these steps:

  • Finalise new lender

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. 

  • Apply for a loan transfer with a new lender

Individuals can apply for a transfer of home loan to a new bank or lender in the following ways:

  1. First, individuals have to visit the financial institution’s website and check all terms and conditions.
  2. If they are satisfied with the repayment terms, they can apply for a loan transfer.
  3. They need to fill in all required details about the existing loan, lender, and property.
  4. Upon filling in the information, they may receive a loan offer.
  5. If they are satisfied with the offer, they have to pay the processing fee and other charges.
  6. After that, individuals have to upload income proof, demographic documents, property documents and wait for the approval.
  • Contact the existing lender

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.

  • Obtain documents from lender

Borrowers must obtain all important documents held by their existing lender, like property papers, land deeds, etc. 

  • Obtain consent letter 

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.

  • Foreclosure of loan account

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.

  • Sign a new loan agreement

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.

Benefits of Home Loan Transfer

Here are some benefits associated with a home loan balance transfer:

  • Low-interest rate

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. 

  • Top-up facility

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.

  • Better customer service

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.

Points to Consider Before Home Loan Balance Transfer

Some points that one can consider before opting for a home loan balance transfer are as follows:

  • Fees and charges

Borrowers can take into account foreclosure charges, processing fees, and other costs imposed by existing and new lenders while deciding on the transfer.

  • Interest rate

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.

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