In today’s economic environment, commercial banks and renowned NBFCs such as Tata Capital offer lucrative home loan options. Therefore, many a times, there arises a need for applicants to avail the ‘Home Loan Balance Transfer’ facility (also known as refinancing and home loan take over). This service facility allows the transfer of unpaid principal amount on home loan from current lending institution to another loan financing institution.
The reasons to opt for a ‘Home Loan Balance Transfer’ for you can include lower home loan interest rates, lower Equated Monthly Instalments (EMIs), flexible loan repayment plan, better customer services and much more. Tata Capital is one of the most popular options to choose for Home Loan Balance Transfer facility.
The Process of Home Loan Balance Transfer
- Checking the Eligibility Criteria
At the initial stages, it is important for the applicant to check the Home Loan eligibility criteria to avail a Home Loan Balance Transfer option. These criteria vary across different commercial banks and financial institutions. The considered factors include minimum number of EMIs undertaken with the previous lender credit score rating of the applicant, minimum principal amount, loan tenure, minimum gross family income and few more. Most institutions resort to ‘Home Loan Eligibility Calculator’ to determine whether the basic criteria are met or not.
- Evaluation of Whether Home Loan Balance Transfer will be Beneficial or not
Firstly, it is important for you to evaluate the difference between current home loan interest rate and the new rate offered. Thereafter, other factors such as EMI plans, loan tenure, processing fees/other charges, customer services, need to be checked upon as well.
If the balance principal amount with the current lender is low, it is advisable not to proceed with the balance transfer option. In such circumstances, it is more convenient to notify your current lender about the proposals being offered by the new lending institution. This might make them re-evaluate your application so as to provide you with better options. It is also important to read the fine print of the agreement from both the lenders (current and new) so as to reach to a conclusive decision.
You can use a Home Loan Balance Transfer Calculator to calculate the savings incurred on availing the balance transfer facility. The basic details such as outstanding loan amount, tenure and new home loan interest rate need to be entered.
- Detailed Discussions with the New Lender
It is advisable for you to understand the practical execution of the balance transfer option. Therefore, discuss the details with the new lender. All queries pertaining to prepayment penalty (if any), time taken for balance transfer, incurred transaction costs (stamp duty, documentation fees, processing charges, conversion fees, prepayment charges) need to be discussed. Few more queries include, understanding of customer services of new lender as well as type of applicable interest rate (fixed or floating).
Documentation Required for Processing
After evaluation of potential benefits and eligibility criteria, the required documentation process should to be followed. The primary documents include applicant’s photographs, ID proof, address proof, recent bank statements depicting EMI payments, income proof of applicant, property documents as well as details of loan outstanding amount.
- Availing the Letter of Consent from Current Lender
Following this, the current lender shall provide a letter of consent with details of outstanding amount, which needs to be submitted to the new lender.
- Transfer of Outstanding Amount to New Lender
On receipt of the letter of consent, the previous/current lender shall transfer the outstanding loan amount to the new lender.
- Closure of the Old Loan Account
Once the outstanding amount is cleared, it leads to closure of the old loan account. Thereafter, all future payments are availed by the new lender. All property documents are handed over by the old lender to the new lender. This officially declares the completion of the balance transfer process.