When transferring the balance of your home loan into another bank, it treats it similar to a new home loan as it is more of a refinance of existing home loan. The main objective of a home loan balance transfer is to get a loan with a lower interest rate than the existing one. It is beneficial when the interest rate in the economy is reduced, in such situations the interest rates of lenders do not change in equal scale and if you are dissatisfied with the service, then the option of home loan balance transfer becomes even more attractive.
The decision of balance transfer, however, should be made after adequately assessing the cost of it, which is the processing fee of the new lender. The overall benefit of balance transfer needs to be given importance at the time of making a decision. The advantage of transfer should be positive and should result in lowering your EMIs.
The list of documents required for home loan balance transfer are:
a) All the property related documents.
b) Loan statement from the previous bank.
c) Last 6-12 months bank statement reflecting EMI paid.
d) NOC from the existing bank.
e) Bank statement indicating your income.
f) Salary slip and Form 16
g) Age, identity and address proof
While transferring your home loan, keep the following factors in mind:
1. Opt for a bank/lender which can offer Great Experience: Interact with existing customers of the new lender to gain an understanding of their service and experience. This will save you from any unpleasant experience that can occur in the future.
2. Don’t get Tempted: Sometimes lucrative offers from the bank of fixed low-interest rate may lure you only to find out after a few months or a year that the low interest was for the initial year alone. The interest after which might actually outdo your benefit of transferring the home loan. You need to be careful when you start your research for finding the right lender and keep yourself away from the grasp of such loan teasers.
3. Weight cost and benefit: Apart from the interest rate you need to consider other fees as well which are to be paid in when you transfer your home loan like processing fee, stamp duty, valuation fee, etc. Thus, you need to carefully assess that whether after incurring all these costs of balance transfer will the benefit of the lower interest rate of new lender is outweighing the cost of transfer or not.
4. Fine Print: Do not assume that things are as it seems from the naked eye. Often you can end up signing on a document with such terms and conditions you do not know about only to discover them later when it has started resulting in a bitter experience. Therefore, make sure to read the fine prints and have a clear idea about are there any hidden costs or not, along with loan-to-value-ratio, prepayment and foreclosure fee, etc.
Additional Reading:- What makes a loan against property different from a home loan?
Balance transfer of home loan is considered refinancing of home loan because it results on the lower interest rate, reduced EMIs, reduces your interest and tenure. It may even have some positive impact on your credit score as well. Though you must make sure that the benefit is actually outweighing the cost and the difference is significant enough to go through the trouble of transferring home loan.