Home loan balance transfer

Home loan balance transfer

The interest rate of an existing home loan and the flexibility the financing institution offers determines whether one continues with the same loan or thinks of a switch. For a lower interest rate and/or other advantages, customers can transfer the outstanding balance to another financial institution or bank. The new finance company pays the old lender the outstanding principal due on the loan.

Who is eligible?

A borrower who has a paid at least 12 EMIs and has a decent credit rating is most likely to get balance transfer offers from other housing finance lenders. The lending institution may also prescribe minimum loan amount eligible for balance transfer.

Application

A new housing loan application must be made to the new lending institution. Some housing finance companies offer online application facilities to complete this process.

Documents

Documents such as photograph, bank statements, photocopies of identity and address proof, income documents need to be provided. In addition, the following documents will be required:

  •  A letter on the letterhead of the existing lending institution stating the list of property documents held by them.
  • Latest outstanding balance letter from the lending institution.
  • Photocopy of property documents.

Foreclosure of existing loan

Foreclosure formalities need to be carried out for the existing loan. The new lending institution may make a payment of the outstanding principal amount in order to release the original documents from the previous lending institution.

New loan agreement

A new loan agreement is entered between the new housing finance institution and the borrower.

Points to note

  • Consider costs involved before taking the decision to do a balance transfer.
  • As per RBI norms, no foreclosure charges shall be levied on floating interest rate loan to individuals by the earlier housing finance institution.

Using Loan EMI Calculator, calculate total interest paid & total principal amount paid at the end of every financial year. Download Mobile app from

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