BALANCE TRANSFER FAQ'S

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A. Home loan balance transfer is a facility that allows home loan borrowers to transfer their outstanding home loan to a new lender for lower interest rate or better loan terms. Almost all lenders offer the home loan transfer facility to their customers. Paying your loan EMIs regularly is one of the factors that help you enjoy loan transfer facility. But before going for home loan balance transfer, carry out a cost-benefit analysis. Calculate the difference between the interest rates offered by the two lenders, the amount of the loan left unpaid and the remaining tenure.

Home loan balance transfer is not an ideal option if the outstanding loan amount is low, if only a few repayment years are remaining or the difference in the interest rate is leading to negligible savings. Also, do not forget to consider processing fee charges, which the new lender would be charging for balance transfer.

A. The key reason for transferring a home loan from one lender to another is to benefit from a lower interest rate provided by the new lender.

A. Yes. The maximum balance transfer amount is equal to the outstanding amount of the home loan.

A. You must not consider shifting your home loan if one of the following is applicable in your situation:

• You have been repaying the loan for a long time now
• Your current bank has a prepayment penalty
• You are planning to move out of the property in the near future

A. In case your credit score has dropped significantly since you applied for the initial home loan, it might affect the process. As the balance transfer process works similar to applying for a new home loan, your credit score and history would play a key role in determining your eligibility for the home loan balance transfer.

A. Most banks today wont have a prepayment penalty in the first place. But if your bank has it, then you can ask your new lending bank to take it into account. This will vary from bank to bank.

A. For instance, if the property value of your home climbs much higher from its original price at the time you took the home loan and you might require more finance for your home renovation. In this situation you can add to your loan. This is called a loan top up. 

Yes, depending upon your eligibility, the loan issuer can offer you the option to top up on the home loan to be transferred to the new bank but there may be processing and legal charges applicable.

A. Processing fees on transfer of home loans range from 0.5% to 1% of the loan amount.

A. The precise reduction in EMI varies based upon:

• Outstanding principal amount
• Existing rate of interest charged by your bank
• Rate of interest presently offered by the new bank
• Your current EMI

A. The simple steps following below are involved in transfer of your loan:

• Check the current rate to calculate interest savings
• Estimate the cost based on the various fees and charges
• Shortlist a new bank and decide if a top up loan is needed
• Collect the property documents deposited in your existing bank, and the foreclosure letter as well
• Apply for loan with the new bank along with the Xerox copies of property documents
• Obtain sanction letter to execute new loan agreement
• Get disbursement from the new bank by way of cheque or demand draft in favor of existing bank, and then deposit the same
• Obtain and deposit property documents from old bank to new bank

• Check and analyze the interest rate track record of the new lender and ensure that the lower interest rate offered by the new lender is genuine. You can compare offers by various banks on our website and ask our expert team for      suggestions and clarifications.
• Assess the service quality of the new lender to make sure they meet your expectations. Lower rates shouldn't come at the expense of below par service.
• Check the benchmark rate that is the base rate and the prime lending rate. Loans which are base rate benchmarked  are more transparent and are preferred over lending rate benchmarked loans.
• Whether the spread is variable or fixed is an important question. The two parts of an interest rate applicable on floating rate loans consists of a benchmark rate along with the spread  above it. The benchmark rate is expected to change over time, but the spread is supposed to stay fixed, except in case of default. You must avoid loans having variable spreads and opt for floating rate loans that      have a varying interest rate only with a change in the benchmark rate.
• Estimate transaction costs which would include the processing fees, documentation charges and stamp duty.
• Issue notice to the existing bank prior to applying for another. Check your loan agreement carefully and make sure that due notice is given to or waived by your existing bank.