If you have availed of a home loan from a specific lender, and you think they are charging you a higher interest than others or if you are not happy with their service, you can move your loan to a different lender. This process is called home refinancing for home loan balance transfer.
Transferring a home loan from one lender to another works like mobile network portability. You can switch your loan to a different lender to avail the benefits of lower interest rate and better services. The RBI introduced the home loan balance transfer facility for the benefit of the customers who felt they are being stuck with the same lender.
The home loan transfer facility is a big boon for all borrowers as it helps them avoid paying a high interest and make the repayment easier and more affordable. So, if you want to transfer your home loan to a new lender from the existing one, you must be aware of the specific RBI home loan balance transfer guidelines.
So, let us discuss the step-by-step process.
- Visit the branch or the official website of the new lender where you want to transfer your home loan and understand the loan transfer term and conditions. You must pay special attention to the loan transfer fees, the processing charges levied by the new lender, the rate of interest, etc.
- If you feel you can benefit from moving your loan from the existing lender to the new one, apply for a balance transfer.
- But before you start the home transfer application process with the new lender, you must obtain a letter of consent, the home loan statement, and the documents for transfer from the old lender.
- Next, submit the loan transfer application form along with the necessary documents to the new lender.
- Once you submit the form and the necessary papers, the lender will verify the loan details and the papers and draw a new loan offer outlining the details.
- If you are happy with the new terms, you can pay the processing fees and wait for the lender’s final approval.
- When you receive the sanction or approval letter, you must sign the same and send it back. The lender will initiate the process to pay off the balance loan amount to the old lender and complete the transfer process.
- You can not start repaying the EMI to the new lender as per the revised interest rate and term and conditions.
Now that you are aware of the process to complete the home loan balance transfer, it would help to understand its benefits.
- One of the most significant and obvious benefits of home loan balance transfer is that it helps you lower the EMI because of the interest rate revision. Even a small difference in the interest rate like 0.5% can help you save a sizeable amount on the interest payment in the long run.
- When you transfer your home loan to a new lender, you may be eligible to get a top-up home loan. You can avail this amount to carry out home renovation or purchase a bigger home.
- Another significant advantage of home loan refinancing is that the new lender may offer you better and custom-made services. For example, the lender may have a lower prepayment fee than your previous one.
- As the new lender draws up new terms and conditions, you can negotiate with them to increase or decrease the loan term as per your financial status and repayment capacity. If you think you can pay a higher EMI, you can reduce the term and pay off the loan faster.
Home loan balance transfer allows you to manage the home loan repayment more efficiently.