Lenders make money by charging interest on loans. Therefore, when a borrower closes their loan or chooses to transfer their loan to another lender, lenders lose money. Therefore, until a few years ago, borrowers could not transfer their loans to another lender. However, a few years ago, the Reserve Bank of India passed a mandate. Now, borrowers on floating rates of interest can prepay their loans at no additional cost. Home loan balance transfer is the process of transferring one’s loan from one’s current lender to another offering better loan terms and conditions. Since individual borrowers on floating interest rates can transfer their loan to another lender at no additional cost when they opt for a home loan balance transfer they just have to pay a home loan balance transfer fee. This home loan balance transfer fee is a small percentage of the total loan amount. Thus, this fee often turns out to be a hefty sum. Therefore, borrowers must opt for a home loan balance transfer after performing a proper cost-benefit analysis. 

Benefits of Home Loan Balance Transfer 

Here are some of the benefits associated with home loan balance transfer: 

– The most common reason why borrowers opt for a home loan balance transfer is that another lender is offering them a lower rate of interest. A lower rate of interest reduces the cost of borrowing the loan and makes a loan more affordable. 

– When you opt for a home loan balance transfer, you can even reduce or extend your loan tenor. If your current home loan EMIs have become unaffordable, extend your loan tenor. However, if you want to become debt-free soon, you must reduce your loan tenor while opting for a home loan balance transfer. Similarly, you can also change your interest rate regime when opting for a home loan balance transfer to make your loan EMIs more affordable. 

– Lastly, when you opt for a home loan balance transfer, you also get the option of availing of a top-up loan. This top-up loan comes at low interest and can be used to meet any personal or professional need.

 When you opt for a home loan balance transfer, you essentially get the option to decide on another lender who you think you will be happy with. Thus, when you go for a home loan balance transfer, you can do your research and decide to go with a lender who is known for providing better facilities as well as having a customer-centric approach. When you choose the right lender, the process of loan repayment becomes a lot easier. 

Let us now look at the process of home loan balance transfer.

– If you plan to opt for a home loan balance transfer, the first step in the process is notifying your current lender that you are interested in transferring your loan to another lender. For this, you will have to either write to them or fill out a form stating your reasons for the home loan balance transfer. 

– Once your current lender has accepted your request, they will release a no-objection certificate. 

– After you have got a no-objection from your current lender, the next thing you must do is submit all your documents to your new lender. 

– At this stage, your new lender will pay off your old lender and your old lender will close your loan account. 

– Once this is done, you will have successfully transferred your loan to your new lender. Now your EMI obligation would be towards your old lender.