When buying your dream home, availing a home loan to take care of the finances involved is the ideal way to go. Aside from providing the necessary funds, home loans have a number of additional benefits. But what do you do when you can’t afford the EMIs that you had earlier agreed to pay? While this may be a difficult situation you may find yourself in, it is fairly common (so you aren’t the only one). Difficult times often call for calculated and preemptive measures. One way out of the predicament is by transferring your outstanding home loan balance from your existing lender to a new lender.
To understand this better, let us start with the basics of home loan balance transfer.
What is a Home Loan Balance Transfer?
A home loan balance transfer is a relatively simple concept. Essentially, the process entails the transfer of the outstanding debt of an existing home loan to a new lender or financial institution. This is essential to buy more time, or to acquire certain benefits that were otherwise non-existent in your previous home loan. This transfer does not involve a maximum limit, as essentially the entire loan is transferred to a new lender, prematurely closing the existing home loan.
Who Should Apply for a Balance Transfer?
A balance transfer offers a number of benefits for certain borrowers. Let’s look at who benefits most from this transition.
Individuals struggling to pay existing EMIs: It essentially gives borrowers a little more time to get their finances in order.
- Individuals looking for better interest rates: This situation is ideal for borrowers who feel overburdened by their existing home loan interest rates and are looking for greener pastures.
- Financing additional projects: Borrowers looking for additional money to finance the completion of a project that they may have miscalculated early on.
- Dissatisfaction with the current lender: Some borrowers may find themselves dissatisfied with their current lender due to a bad experience. The option to transfer their existing home loan may serve as a good opportunity to move away from the previous lender.
Benefits of Home Loan Balance Transfer
In addition to all the benefits discussed thus far, there are a number of additional benefits that a home loan balance transfer offers to borrowers.
Once you transfer the home loan to a new lender, you can avail lower home loan interest rates on your EMIs.
- You can also lower your monthly payable EMIs.
- There is a distinct possibility that your credit score increases after the loan transfer.
- You have the opportunity to negotiate the terms with your new lender before finalising the home loan balance transfer.
- You can also avail the home loan balance transfer facility if you have grievances or aren’t satisfied with the services of the current lender.
- You can choose to increase or reduce the tenure of the home loan depending on your repayment capabilities.
Steps to Transfer Your Existing Home Loan
Before you get started with transferring your existing home loan, you will first need to meet certain eligibility criteria. The minimum eligibility for your existing home loan should be:
- You have paid a certain amount of EMIs on your existing loan. Most lenders will need a total of 50% of your entire EMI repayments made on time.
- Next, it’s important that you don’t have any outstanding dues on your existing loans. This includes any late payment charges or interest payments.
- It’s also important to note that you must possess the property that is or can be occupied or sold.
- For your own benefit, conduct a quick cost-benefit analysis. You should see the tangible benefits of transferring your home loan.
If you successfully meet all the eligibility criteria listed above, you should follow the next few steps to transfer your existing home loan:
- Step 1: Apply for the balance transfer and get approval from the new lender
- Step 2: Obtain a No Objection Certificate (NOC) from your current lender
- Step 3: Furnish important documents, such as KYC, bank statements, a copy of your outstanding balance and your property documents from your current lender
- Step 4: Wait until the new lender clears the outstanding balance, and completes the foreclosure formalities
- Step 5: Furnish your property documents to the new lender, and avail the balance loan amount
Home loan balance transfer offers a number of key benefits to borrowers. Remember that when opting for a transfer of your existing loan, factors like a good track record of past EMI payments and generally high credit scores will work in your favour, when looking for lowest home loan interest rates and an overall better home loan. With those conditions met, you are sure to gain the most out of transferring your existing home loan balance to a new lender.