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What is a Home Loan Balance Transfer

Published On Feb/25/2024

Have you ever considered changing your home loan to a different lender, especially when you spot a lower interest rate being offered elsewhere?

A Home Loan can be a big help when you're buying or building a house. But sometimes, you might not be happy with the loan terms from your current bank. When you initially opted for your home loan, you likely researched and compared various options to find the best fit for your needs. While your chosen lender may have seemed ideal at the time, it's possible that another lender now offers more favourable terms. If you're unsatisfied, you can consider transferring your Home Loan to other bank, which might make repayment easier. Let’s understand more about home loan transfer.

What is a Home Loan Balance Transfer?

Home Loan Balance Transfer, often called Home Refinancing, allows you to move your remaining home loan amount from one bank to another. This is useful if another bank offers better repayment terms, like lower interest rates or a more extended repayment period. When you decide to switch, the new bank takes over your existing loan by paying off what you owe to your current bank.

What is the home loan transfer process?

Here's a simple guide to help you move your home loan to a different bank:

Apply for Home loan balance transfer: First, tell your current bank that you want to transfer your home loan. You might need to fill out a form or write a letter explaining why.

Get a No Objection Certificate (NOC): Your current bank will give you a NOC or a consent letter, which you'll need to show to the new bank.

Provide Documents: Give the new bank the NOC and other necessary papers. This could include ID proofs, property documents, loan details, and any other papers the bank asks for.

Wait for Confirmation: Wait for your old bank to confirm that your original loan is closed.

Pay Fees: Once everything's confirmed, pay any fees to the new bank, and you'll start your new loan with them.

What are the charges for a Home Loan Transfer?

According to the Reserve Bank of India (RBI), if you're moving your home loan from a bank with a floating interest rate, they can't charge you any extra fees. But, if you have a fixed interest rate, some banks might charge you a pre-payment fee, which could be between 1-3% of the loan amount.

When should you consider choosing a home loan balance transfer?

Switching your home loan isn't something you should do all the time, especially just because of a small rate cut. Here are some situations where it makes sense:

Early Years of Loan: If you're still in the early years of paying back your home loan, switching can save you money. But if you're close to finishing your loan, it might not be worth the effort or cost.

Large Remaining Amount: If you still owe a lot on your home loan and a new bank offers a lower interest rate, it could be beneficial to make the switch. But if you've almost paid off your loan, it might not be worth the trouble.

Check the Total Cost: Don't just focus on a lower interest rate. There are costs involved in moving your loan to a new bank. So, make sure the savings from the lower rate outweigh the transfer costs.

In a nutshell

Before moving your home loan, consider both the benefits and the costs to see if it's really worth for you. Aditya Birla financial limited offers home loans at affordable interest rates, with easy repayment options and tenure.