The growth of the housing financing market in India stood somewhere near Rs.11.5 trillion with a CAGR of 16% during the past six years up to March 2019. Noticing this drive, lending companies have been coming up with various new housing finance benefits all through these years and have successfully made this market more competitive.
A housing loan mostly offers repayment tenors up to 20 years, and hence individuals must be aware of all of its terms as a substantial part of their income is allocated to service its EMIs. This advanced facility includes a considerable amount and so the rate of interest concerns every borrower. Therefore, it is always preferable to choose the most affordable interest rate.
Nonetheless, among many ways, a home loan balance transfer is one of the most popular ways to bring down interest rates and consequently the total repayment liability.
How does a loan transfer work?
Before going into the process, individuals should know some essential facts about the refinancing facility.
Home loan refinancing or balance transfer is a facility provided by most reputed lenders in India. The primary objective of this feature is to provide relaxation on interest rates.
In other words, when the total unpaid principal advance is shifted to a different financier for a competitive interest rate and other favourable terms, it is done through the refinancing facility.
By doing so, the initial lender receives the complete unpaid amount, and a borrower becomes liable to repay the loan liability to the new loan provider at a new rate. Individuals with a timely repayment record find it convenient to opt for a home loan transfer benefit. However, a cost-benefit evaluation is suggested before considering it.
When choosing this facility, borrowers should evaluate the difference of interest rates provided by two financiers, the unpaid amount, and remaining tenor. For example, if the remaining payable amount of home loan is not overwhelming or the tenor also comes closer to the end, transferring credit may not be much beneficial.
Depending on the lender, loan transfer also comes with several fees, and therefore, may turn out to be not useful at all if not timed properly.
However, there could be several other reasons to refinance home loans such as availing other favourable terms. So, borrowers should assess such benefits and proceed accordingly.
Steps to transfer your home loan balance
Borrowers who wish to transfer their home loan can follow the steps listed below.
● Step 1: Application submission to the existing lender
Borrowers can proceed to apply for a balance transfer with the current lender. While submitting a loan transfer application, individuals need to mention the reason for such transfer. They also need to fill-up the form correctly with all the required details.
● Step 2: Collect the NOC
On completion of this first step, lenders can provide a consent letter or NOC. This letter is a vital document for future reference. When applying for a loan transfer to a new lender, they can ask for NOC from the previous financier.
● Step 3: Complete documentation
After receiving this consent letter, individuals can contact the new lender and submit all required documents for the balance transfer loan processing. These documents can include KYC, loan account statement, registered property papers, interest statement, NOC, and an application letter or form.
● Step 4: Receive confirmation from the existing lender
Once individuals produce all mandatory documents, they might have to wait until the final confirmation of old account closure arrives from the previous lender. Closing a loan account suggests the end of the contract between the borrower and former financier, comprising all governed terms and conditions.
● Step 5: Pay applicable fees
While signing up with the new lender, borrowers need to pay all the applicable charges that come along with the transferring facility. Afterwards, individuals can pay their next monthly instalment to the latest lender at a lower interest rate.
However, there are many guides online which lets you know the easy steps for home loan transfer when opting for a balance transfer, borrowers should consider lenders that can lay down hassle-free and minimum documentation requirements. Moreover, along with loan transfer, such lenders can also provide top-up loans of up to Rs.50 lakh to cover diverse, high-value expenses as these advances do not come with end-use restriction.
Additionally, some lenders also provide pre-approved offers that are known to facilitate fast and convenient loan processing. These offers are available on several financial products like home loans and loans against property. Applicants can view their pre-approved offers by entering their name and contact number.
To sum it up, a balance transfer can be considered as an exit from paying substantially higher charges for availing home loans where better options are available. Individuals should also always ask the lender about home loan reset clause while opting for their service.