Home loan balance transfer refers to the process of transferring one’s home loan from one lender to another offering better loan terms and conditions, such as a lower interest rate, longer repayment tenor, better service, etc. You should go for home loan balance transfer as it is a useful facility, one must keep in mind certain things before opting for this facility. In this article, we look at things one must keep in mind when opting for this facility. 

• If you want to shift your loan to another lender, the first thing you must do is check if your current lender will allow you to transfer your loan to another lender. Though the RBI has mandated that no lender can charge any additional fee if a borrower on a floating rate of interest wants to close their loan, if you are on a fixed rate of interest, you may be asked to pay a certain fee. Further, it is up to the discretion of the lender to accept or deny your home loan balance transfer request. So, before you apply to another lender for a home loan balance transfer, write to your current lender, expressing your desire to transfer your home loan and wait for them to respond. 

• If you have decided to go for a home loan balance transfer, talk to as many lenders as you can and request each lender to present you their offer in writing. While it is important that you try and get the lowest home loan interest rate possible, also compare loan offers from different lenders in terms of other things, such as the reputation of the lender, the loan tenor they are offering, additional costs and charges, etc.

• Opting for a home loan balance transfer makes sense when you are still in the early phase of repaying your loan. During the early years, the interest component is higher. As time passes, the interest component goes down and the principal component goes up. Therefore, if you transfer your home loan to another lender when you are very close to the end of your tenor, you won’t benefit much. 

• Home loan balance transfer involves a fee. This fee is a certain percentage of the total loan amount. In general, most lenders charge anywhere between 0.5% to 1% of the total loan value as a home loan balance transfer fee. Since home loans run into lakhs and crores, the home loan balance transfer fee turns out to be a huge amount. Therefore, before opting for a home loan balance transfer, do a cost-benefit analysis, use balance transfer calculator. Transfer your home loan to another lender only if the money you will save by way of reduced interest rates is much higher than the home loan balance transfer fee itself. 

• Lastly, before applying for a home loan balance transfer, please check your credit score. Any lender will offer you a good or low interest rate if your credit score is between 750 and 900. So, do a CIBIL score check before applying for a loan and apply only if your credit score is 750 or above. In case your CIBIL score is not up to the mark, improve it first and then apply for a loan.  

Keeping these things in mind will help you experience a hassle-free home loan balance transfer experience.