When does a home loan balance transfer make the most sense?
You can't transfer your home loan to a new lender every time there is a rate cut. Here are a few situations when a home loan balance transfer is advisable:
1. When the remaining home loan tenor is considerable
When your home loan is in the initial years, a balance transfer is profitable. However, if you are approaching the end of your home loan, it doesn't make sense to incur the cost of transferring the home loan.
2. When the unpaid home loan amount is substantial
If a major portion of the home loan is remains unpaid and you get a lower interest rate with a new lender, it makes sense to transfer the home loan.
On the other hand, unpaid home loans are just 5 to 10% of the total amount, it won't be a wise decision to transfer your home loan.
3. Overall reduced cost
Most borrowers just look at the lower interest rate while transferring the home loan. You must know there will be a cost involved in transferring your home loan to a new lender. Consider the overall cost of transferring the home loan and then look at the benefits involved. If the benefits are higher than the costs, you may proceed with the home loan transfer facility.
What is the Home Loan Transfer Process?
• Apply: Before initiating a Home Loan Balance Transfer, you need to inform your present lender that you wish to do so. You can do this via a letter listing why you opt for the transfer or an application form, whichever your bank requires.
• No Objection Certificate (NOC) or Consent Letter: After applying, the original lender will offer you a NOC or consent letter. This document is essential for applying for the transfer with a new lender.
Submitting the Documents: Now that you have the NOC, you can hand the required documents to the new lender. Along with the NOC, you might have to submit KYC paperwork, property papers, loan balance, and interest statements. Along with this, you need to submit all the mandatory documents as cited by the bank.
• Confirmation from Old Lender: After handing over the documents, wait for confirmation from your old lender that the original loan has been closed.
• Payment of Fees: Once you receive the confirmation, you can pay the requisite fees to the new lender and begin a new loan contract.