A home loan balance transfer allows you to switch between home loan lenders to benefit from lower interest rates and better terms. This means that you can transfer your home loan from your existing lender to a new lender who is offering you a reduced interest rate. Before you decide to go ahead with home loan refinance, however, you should consider a few things.
Is it the right time to transfer your home loan?
To answer this question, you need to check two things:
- Interest rate difference
Only if the interest rate being offered by the new lender is lower than your current home loan interest rate does it make sense to opt for a home loan balance transfer. You should not look at this rate difference in isolation, however. That is because a home loan balance transfer also involves charges such as prepayment charges and processing fees. So, you need to consider how much your interest savings would be vis-a-vis the cost. For this, you can make use of a home loan balance transfer calculator. This is a free online tool that instantly calculates your interest savings on your home loan balance transfer.
- Loan tenure left
The amount of loan tenure left plays a big role in determining whether it is the right time to opt for a home loan balance transfer or not. Depending on the tenure left of your home loan, even a 0.5% interest rate difference could add up to significant interest savings if you have the majority of the tenure left. In other cases, even a 1% interest rate difference may not be beneficial if you are at the end of your loan tenure and the cost of home loan refinancing turns out to be higher than the interest saved.
Home loan transfer eligibility: What you need to know
Once you do a cost-benefit analysis using the home loan balance transfer calculator and determine if it’s advantageous to transfer your loan, you should check the home loan transfer eligibility criteria. Here’s what you should keep in mind:
- You need to complete the home loan lock-in period, which is usually between six and 12 months. Before this period, you cannot transfer your home loan to another lender. This ensures that your existing lender gets a minimum amount of EMIs before you consider transferring the loan.
- Another essential home loan transfer eligibility criterion is ensuring that you have paid all your dues and have not defaulted on any of your EMIs. This is important because you require a No Objection Certificate (NOC) from your existing lender to transfer your loan.
- In addition to the NOC, there are also other documents required for a home loan balance transfer. These include the home loan statement, property documents, income proof, KYC documents, and more.
After going over the home loan balance transfer eligibility and using the home loan balance transfer calculator, you can go ahead and apply for home loan refinance.