If you had taken a Home Loan a few years ago, you are probably paying an interest rate that is way higher than the interest rate that people applying for Home Loans today have to pay. You may feel like you are stuck with this interest until the end of your credit. However, that is not the case. Most banks offer you the benefit of Home Loan Balance Transfer which means the new bank that you choose with the lower interest rate pays off the outstanding balance amount to the former bank. You then pay the monthly EMI (Equated Monthly Instalment) for that amount to the new bank at the lower interest rate. This can help you save a lot of money for things that are more important.
Steps involved in a Home Loan Balance Transfer:
Step 1
Cost-benefit analysis
You need to take into consideration the benefits of a Home Loan Balance Transfer to another bank. Here are a few guidelines that will help you assess the situation and decide.
- If you have a Home Loan that has long repayment tenure, transferring your credit could be beneficial as that would mean that you are getting higher benefits.
- Look into any hidden costs that would be involved in the process. Hidden costs could include documentation costs, stamp duty, and so forth.
- If you have a fixed interest rate, then you may have to pay a prepayment charge if you want to transfer a loan so it may not be as beneficial as if you had an adjustable rate would be.
This process would take 15 minutes once you have done the proper research which can usually be done from the comfort of your home.
Step 2
A NOC from the previous bank
The next step that you would have to do is inform your bank that you intend to transfer your loan and get a NOC from the bank. However, this step takes a few weeks as your current bank may try to offer you better benefits and a lower interest rate. You can accept this offer from your bank and could maybe get a counter offer from the new bank that you intend to take your loan to.
Along with the NOC, you also need to get a foreclosure letter, loan payment history, and a list of all of the documents that your current bank has.
Step 3
Home Loan Balance Transfer application
Once all of the documents that you need are with you, you can Apply for a Home Loan Balance Transfer to Another Bank. In addition to the paperwork that you have from the previous bank, you would also have to get a NOC from the society that you live in or the builder if your home is still under construction. You would also have to provide the new bank with documents such as a proof of income, proof of ownership, and identity proof so that you can prove to the new bank that you can pay back the loan on time. Each bank has their process so it would differ a little bit from bank to bank.
Step 4
Credit Approval
At this step, the new bank that you are applying to would evaluate all of your documents and your application before they approve your loan transfer. This is another process that takes a lot of time as a bank may or may not as you for additional documents depending on your case. You would also have to go through an extensive background check that involves –
- Re-evaluating the Home Loan
- Checking your current credit history
- Verifying the ownership of the home
Once this process is completed, the new bank would give you a letter stating the new interest rate along with the terms and conditions so that you can make your decision.
At this point of time, you would have to make your final decision about whether or not you want to switch your home loan to a new bank or switch to the lower rate that your current bank is offering you.
Step 5
Documentation
This is the final step of the process where you would complete the required documentation with the bank of your choice. If you have chosen the new bank, then that bank would have to do a balance transfer of the Home Loan to the old bank before the old bank releases your papers to the new one.
Although the process looks complicated with the right knowledge, this is very simple. Most of this process can be done online, and banks also offer you doorstep service where a representative from the bank will pick up the documentation from your home.
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