The easy availability of Home Loans has made home-buying exponentially simple. Innumerable banks and NBFCs offer attractive Home Loan schemes. But, while they fulfil your dream of owning a home, Home Loans don’t really come cheap. Home Loan interest rates usually range from 9.8-12% and this can result in a huge interest calculation depending upon the loan amount and the loan tenure.
Let’s assume that you avail of a Home Loan of Rs.30 lakh at 10% for a tenure of 20 years. The EMI you’ll need to pay will be Rs.28,951 and the interest amount will be Rs.39, 48, 156 which clearly is more than your loan amount. You can decrease the interest by increasing your Home Loan EMI payment, which automatically will bring the tenure down.
Another great way to reduce the interest amount is by going for a Home Loan Balance Transfer. Interest rates keep fluctuating and you’ll never benefit from falling interest rates if you’ve availed a Home Loan under fixed lending rate scheme. Transferring your loan to a new lender can help save a lot of your hard earned money.
What is Home Loan Balance Transfer?
A balance transfer of a Home Loan is the process wherein you transfer your outstanding principal loan amount to another bank or NBFC mainly because of a better interest rate, and also for other facilities.
Balance transfer is a very lucrative for all borrowers but every few individuals actually avail it, as not everybody is aware of it. All banks and NBFCs offer a balance transfer and it is a great option as financial institutions usually come with attractive balance transfer schemes to allure customers. This means you not only benefit from the fall in interest rate but other facilities. Moreover, with the new lender you can make changes in your loan scheme and tweak it according to your need.
Another great thing about Home Loan Balance Transfer is the prospect of snagging a Top-up Loan that you get at a very low interest rate. Most financial institutions let you use this money any way you want.
When to Consider a Home Loan Balance Transfer?
Some of the scenarios where it’s best to consider a balance transfer for your Home Loan are:
Lower Interest Payout
This is the primary reason to opt for balance transfer, as already mentioned above. However, it’s important to transfer the loan at the earliest to ensure better savings. The savings generated should be large enough to help you make other investments and not just cover the cost of loan transfer.
Non-approved Top-up Loans
Many banks and NBFCs offer fund over and above existing Home Loan amount and if your lender is not offering you the same, you can consider to switch. The interest rate charged is usually lower than what you’re already paying for your Home Loan.
Substandard Quality of Services
Most lenders tend to forget about the borrowers as long as they keep paying their EMI diligently. Consider a balance transfer, if your current lender doesn’t offer you special benefits and privileges for being a responsible borrower for all these years. Try and negotiate the interest rate too, if it has reduced over the years and ask your lender to adjust your interest rate with the current one. If your lender refuses, look for others.
Better Terms and Conditions
While looking for a new lender, you’ll be in a position to negotiate new terms and conditions. You can consider increasing your Home Loan EMI or increasing the tenure, anything you’re comfortable with. If a lender offers you the terms you’re looking for, just grab the opportunity.
Process of Home Loan Balance Transfer
When looking for balance transfer, it’s important to shop around and explore all your options. You simply can call the banks’ or NBFCs’ call centre, or do a simple search online to know about the various schemes in the market. You’ll also need to pay a processing fee when opting for a balance transfer and that is one important point to consider.
You’ll need to have a word with your lender and get the detailed report of the principal amount left to be repaid, rate of interest, and tenure completed, and also know on whose name the demand draft or the cheque has to be made. The bank or NBFC would pay your current lender or you can even have the amount in your bank account transferred to your lender. Many banks and NBFCs have different eligibility criteria for Home Loan Balance Transfer, so make sure to check the same with the financial institutions you approach.
The documents required for home loan are more or less same for all banks and NBFCs. However, it’s still a good idea to ask what exactly they need. Some of the documents they’ll ask from salaried individuals are:
- Three months’ salary slips
- Identity proof
- Three month’s bank statement (the account where your salary gets credited)
- KYC documents vary from one financial institute to the other
- Two photographs
If you’re self-employed, you’ll need provide the following:
- Balance sheet and profit and loss statement for the last 3 years
- TAN (Tax deduction and collection account number) card
- Your bank’s current account statements
- Your saving account statements
You can go for Home Loan Balance Transfer as many times you want and that’s the beauty of this scheme. You can opt for it every 3-5 years and repay back your loan sooner than you could ever imagine.