A few years ago, the Reserve Bank of India came up with a new mandate: home loan borrowers on floating interest rates can now foreclose their loan at any point during their home loan tenor without paying any penalty. This has made it possible for home loan borrowers to transfer the remaining balance on their home loan to another lender if they find a lender willing to refinance their loan on better loan terms and conditions. This facility is called home loan refinancing and most lenders offer it these days. Borrowers must however know that while their current lender cannot charge a foreclosure penalty if they are on floating interest rates, the new lender they apply to will treat their home loan balance transfer application as a new home loan application and therefore, a home loan balance transfer will be applicable. The home loan balance transfer fee can range from .50% to 2%. Therefore, home loan borrowers must opt for a balance transfer after carefully weighing the pros and cons and doing a proper cost-benefit analysis.  

If you are planning to opt for a balance transfer, familiarizing yourself with the home loan balance transfer process will allow you to navigate the entire process without any hassles. So, here is how a home loan balance transfer works. 

Home Loan Balance Transfer Process Explained

1. If you wish to transfer your loan to another lender, the first thing you must do is inform your current lender of your wish to do so. It is only after you get a No Objection Certificate or NOC from your current lender that will you be able to apply for a home loan balance transfer. Further, your current lender will also release a track record of all your payments along with a copy of all the documents you submitted to them at the time of applying for the loan. 

2. Apply for a home loan with your new lender with all the documents released by your current lender as well as the NOC certificate. 

3. As mentioned before, your new lender will treat the home loan balance transfer application as a new home loan application. They will therefore do a check on all the documents provided by you. During this step of the process, they will also check your credit score. Having a credit score above 750 will not only make it easier for you to get approved for a home loan balance transfer but you will also be able to negotiate for the most beneficial loan terms and conditions. 

4. If you pass the document verification stage, your lender will call you for a round of discussions. They will then release the home loan offer letter. This letter will contain details of the loan offer they plan to make to you. Go through the loan terms and conditions very carefully and sign the loan agreement only after you understand everything. 

5. Once you do this, your lender will pay off your current lender and your old home loan will get closed after this. You will now have to start paying your new lender. 

The home loan balance transfer process is fairly simple. However, once again, you must go ahead with the home loan balance transfer after performing a very thorough cost-benefit analysis. We recommend using a home loan balance transfer calculator.