Home loan are long tenure loans of up to 30 years and hence, you are bound to spend a large amount your income in servicing it. Home loan interest rates matters as more than 50% of your home loan EMI component is loan interest amount you pay to the bank during the loan tenure. The current interest rates on home loan ranges from 8.50% to 12.10% with a lowest EMI of Rs. 758 per lakh. You should seriously consider transferring your home loan to another bank, if you feel that interest rate and EMI you are paying on your existing loan is higher than the lowest rate and lowest EMI offers in the market.
Ideally, the benefit of home loan transfer is in the initial 4 to 5 years of loan as you pay the highest interest component in the initial years. Loan transfer in the mid or end of the tenure can work against you financially as you had already paid the higher interest part to the lender. So, before you decide to opt for balance transfer, do a thorough analysis of all savings and costs associated with the transfer of loan
► Reduction in interest rate from high rate to as low as 8.50% per annum ► Reduction in monthly EMI by upto 5% depending upon the rate difference, balance tenure and EMI ► Option to avail top up loan at same rate as home loan rate (8.50% to 8.8%) subject to eligibility conditions and loan to value ratio ► Lower interest rates and other discounts like nil processing fee offered by another lender ► Option to opt for smart saver home credit facility or maxgain facility to save interest ► Balance transfer options available at various banks like SBI, Bank of Baroda, HDFC, ICICI and others
You can opt for home loan balance transfer if you have outstanding home loan in one bank. Basic eligibility criteria are age, income, employment history and loan to value ratio. Other main eligibility factors which are important for refinance home loan -
► Applicant must be running an existing home loan from another lender ► Some lenders may require that an applicant should have paid at least 6 to 12 EMI’s on existing loan before opting for balance transfer. However, at times, this condition may be waived and home loan takeover may be possible even if the loan has not run for 6 – 12 months ► There should not be any default in payment of EMI on existing loans ► In case of under construction property, the project must be approved with the new lender. Note that balance transfer of home loan on new property whose possession has been handed over but registration has not been done may not be possible ► In case of ready property, registration should have been completed
Follow the below simple steps on how to transfer your loan from bank to another ► Check your current rate and calculate interest savings ► Calculate the estimated cost on account of various fees and charges as given above ► Shortlist new bank that you wish to transfer your loan to; decide if you want top up loan or not Obtain list of property documents deposited with your existing bank (in case this is not available with you already) and foreclosure letter from existing bank ► Apply for loan with new bank with photocopy of property documents as per list of property documents with existing bank ► Obtain sanction letter and execute new loan agreement ► Take disbursement from new bank by way of cheque/ demand draft in favor of existing bank and also deposit the same ► Obtain property documents from old bank and deposit with new bank