For quite some time, Kolkata-based professional Arup Choudhury was looking to transfer his outstanding home loan to a new lender to avail it at better terms. “The recent hike in home loan interest rates further expedited my search and resolution to opt for Home Loan Balance Transfer. Along with a lower home loan rate of interest, my objective was to switch to a lender offering better customer service,” says Arup.

Arup is not alone.

Many home loan borrowers look forward to availing of Home Loan Balance Transfer to lower their interest rates and save on EMIs. So, what is a Home Loan Balance Transfer, and what are its various aspects? Let us find out.

What is Home Loan Balance Transfer?

A Home Loan Balance Transfer is a process through which you transfer the outstanding home loan balance from one lender to another. It is primarily done to avail of a suitablerate of interest.

In Home Loan Balance Transfer, the new lender verifies your eligibility first and you then carry out foreclosure formalities. On switching a loan, the loan balance with the previous lender is paid fully by the new lender. 

“Home Loan Balance Transfer can be a prudent way to save on EMIs. If leveraged well at the right time, it could result in significant savings in the long run”, says Bhagyasree Ghosh, an independent financial analyst in Mumbai.

Apart from the procedure, there may be several charges for Home Loan Balance Transfer levied on the new loan application. It is recommended that a borrower factors in these charges and calculates overall savings before proceeding. Since these charges differ across lenders, a borrower should check with the new lender on their website or through their customer care representative.

Why Should You Be Choosing a Home Loan Balance Transfer?

There are many reasons why a borrower may opt for Home Loan Balance Transfer, but here is why it can be a profitable deal for you:

• Lower interest rates
• More flexibility for loan repayment
• Foreclosure and Prepayment Charges
• Larger Home Loan Top-Up amount
• Better customer service

However, Bhagyasree sounds a word of caution and says, “Borrowers contemplating Home Loan Balance Transfer need to do it at the early stages of their loan. As the loan matures, the principal amount gets paid, it reduces your liability and makesa balance transfer a futile effort”.

Pros and Cons of Home Loan Balance Transfer

Pros

• Sanction of Top-up Home Loans

Some lenders sanction top-up loan facilities with a balance transfer. Top-up loans help you fulfill home and personal needs on the go. Home Loan balance transfer with top-ups may come in handy for additional and unexpected expenses coming your way.

• Additional Benefits

There are many lending institutions that offer unparalleled additional benefits when you opt for Home Loan Balance Transfer. For instance, if you opt for a Home Loan Balance Transfer from Godrej Housing Finance, apart from a suitable rate of interest and great customer service, you can benefit from speedy sanctions and no prepayment and foreclosure charges. You can also avail of additional top-up loans and an EMI break in the first 3 years of your loan in accordance with specific terms & conditions.

 

Pro-tip: Always check with your lender for any Home Loan Balance Transfer offers for the best possible deal.

Cons

• Lowering of Tax Benefits

Tax breaks are an integral part of Home Loans. You get benefits on the principal and interest under different sections of the IT Act. When you switch to a new lender offering a lower home loan interest rate, the quantum of tax outgo may also reduce, depending on the interest amount, existing tax laws, and the tax bracket you fall under.

• Potential Hidden Charges

While a lower rate of interest may seem a lucrative bet, your decision should not rest on it alone. Adopt due diligence andread thoroughly the terms and conditions to find out any potential hidden charges to avoid nasty surprises later.

Home Loan Balance Transfer Eligibility

Most lenders, such as Godrej Housing Finance, have their own Home Loan Balance Transfer Eligibility Calculator which can be used to predetermine whether you meet the minimum eligibility criteria. However, for loan transfer, your application will be meticulously evaluated to determine your eligibility and accept the transfer request based on various factors. 

Home Loan Balance Transfer Documents List

Home Loan balance transfer document list includes basic KYC and income documents along with property documents. The list of documents may slightly differ depending on whether you are salaried or self-employed. Generally, lenders provide all the information on their respective websites.

Conclusion

Different borrowers have varying demands! If you are looking out to make the switch, we recommend undertaking a cost-benefit analysis to evaluate your decision. A Home Loan EMI calculator, that helps to calculate the EMIs, can also be of great assistance in making your evaluation process much faster. However, Borrower discretion is advised before usage of any means & contents.

Godrej  Capital  is  the  financial  services  arm  of  Godrej  Group  which  offers  home  loans,  Loan Against Property and other secured loans. With innovative products and offerings, customers can get hassle-free loans on easy terms and conditions. Click here to know more about the offering.

Disclaimer: The names used in this article are fictitious and are used for representational purposes only.

The contents of this article is for information purpose only. For more details, please refer to the product or service document and/or connect with our customer representative prior to making any financial decision.The information is subject to update, completion, revision and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its affiliates to any requirements. Godrej Capital or its affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.