Home Loan: The Reserve Bank of India retained the repo rate at 4%, thus reducing the interest rate on a home loan. Consequently, several financial institutions are offering a home loan at a nominal home loan interest rate. Thus, existing home loan borrowers can take advantage of the same and opt for a home loan balance transfer to enjoy the reduced financial burden of monthly instalments and other flexible repayment terms. 

What is a home loan balance transfer?

Before moving ahead with the process of applying for home loan balance transfer, take a look at what does this facility means –

A home loan balance transfer allows borrowers to transfer their outstanding principal balance to another financial institution offering a competitive interest rate on a home loan and other benefits. 

Here’s how a home loan balance transfer can benefit an individual-

Suppose a borrower takes a #homeloan of Rs.25 lakh at an interest rate of 13.5% and the repayment tenor is 20 years. He needs to pay a monthly instalment of Rs.30,184 and the interest outgo towards this loan for 20 years is Rs.47,44,248. If he opts for a balance transfer after 1 year at a reduced interest rate of 12%, the principal outstanding balance will be equivalent to Rs.24,73,700, which is a substantial amount. It is because the borrower needs to make a hefty interest payment of Rs.3,35,912.

If an individual opts for a balance transfer at a 12% interest rate for Rs.24,80,000 and for 20 years, the total interest outgo will reduce to Rs.40,73,665. Individuals can save up to Rs.3,30,000 on interest payment, thus lowering the monthly instalment to Rs.27,307. 

Several financial institutions also provide a top-up loan facility when transferring the outstanding principal balance. Existing borrowers can avail a top-up loan over and above their ongoing #homeloan and use this fund without worrying about its end-use. 

Besides reduced interest rates and top-up loan benefits, these financial institutions provide pre-approved offers on a home loan. These offers are applicable on both secured and unsecured credit options. This streamlines the loan application process. Willing individuals can check their pre-approved offers by submitting their names and contact number. 

How does a home loan balance transfer work?

Take a look at the following stepwise process of #homeloan balance transfer:

Step 1: Individuals need to submit a letter to the existing financial institution requesting a #homeloan balance transfer.

Step 2: The financial institution will issue a NOC or no-objection certificate, foreclosure letter, property documents, consent letter, loan statement.

Step 3: Apply for a home loan balance transfer to a new financial institution and submit the necessary documents. Make sure to check the documents required for this facility before applying.

Step 4: After verifying all documents and required eligibility criteria, the new financial institution will issue a cheque equivalent of the principal amount to the existing financial institution.

Step 5: The existing lender will transfer all loan documents of the applicant to the new financial institution and cancel the post-dated cheques to complete the process. 

What are the eligibility criteria to avail home loan balance transfer?

Indian applicants need to meet the following eligibility criteria before they apply for a #homeloan balance transfer and get the best #homeloan in India:

Salaried applicants

• Age limit – 23 -62 years

• Work experience – Minimum 3 years

Self-employed applicants 

• Age limit – 25-70 years

• Work experience – Minimum business vintage of 5 years

After fulfilling the eligibility parameters, submit the necessary documents mentioned below:

1. Applicant’s recent passport-sized photograph

2. Income proof. 

Note that income proof documents differ with each applicant. Salaried individuals need to submit Form 16 or their current salary slips. Self-employed individuals need to submit the last two years’ profit and loss statements and ITR documents.

3. Bank account statements of last 6 months

4. Self–employed individuals need to submit the business proof documents to validate the business vintage, which needs to be a minimum of 5 years. 

Home loan balance transfer reduces the interest payable towards a loan and reduces the default in loan repayment. Keep the pointers in mind to apply for a #homeloan balance transfer without any hassle.