Overview

Home Loan Balance Transfer helps you reduce your EMIs by moving your outstanding loan from other financial institutes to the one which offers lower interest rate.

Home Loan Balance Transfer or Refinancing or simply Balance Transfer is the process that allows you to benefit from the lower interest rate offered by the other lender. If you have an existing outstanding home loan with one borrower, you can make a home loan transfer, that is, shift the remainder amount to a different borrower who charges a lower rate of interest, the process is termed as a home loan balance transfer or refinancing. This unique home loan transfer service helps a customer avoid high applicable interest rates as listed by one home loan lender and migrate to a lower interest rate structure with another lender.

So why one would need a balance transfer? A home loan involves a significantly large amount of money and therefore, the interest rate on the loan is a matter of concern for everyone who decides to take a home loan. Home loan interest rates may range from 6.80 % to 12 % and one of the most common ways to reduce interest rates is to either talk to the bank that has provided you the loan to reduce it or go for a transfer of the balance on existing home loan or in layman terms, shift your home loan to a bank offering lesser rate.
    Key Features of Home Loan Balance Transfer
  • Transfer the outstanding balance of you existing home loan to another bank or from one lender to another.
  • There is a fee usually equal to 1% of the loan transferred that is payable to the new lender for home loan by the borrower.
  • In most cases, the home loan balance transfer application is treated similar to a new home loan application.
  • The balance transfer on an existing home loan can only be availed after a pre-determined time period as mentioned on the original loan agreement.When the transfer is completed, the borrower owes the transferred principal loan amount plus applicable charges to the new lender instead of the original one.
Any salaried, self-employed professional or self-employed businessperson with an outstanding home loan that has been regularly serviced can apply for a home loan balance transfer. Though all loan providers have different eligibility criteria, some basic ones are as follows:

  • You must be of Indian nationality and of an age 21 to 60 years. Whereas, self-employed individuals are eligible for the transfer up to 65 years.
  • Your credit rating should not fall in the run-up to your loan transfer application. Irrespective of your credit rating during the initial loan application, if the rating dips by the time of transfer, banks might reject your application for refinancing.
  • You should either be employed by your current organization for a certain number of years or your company should have been operating for a time period specified by the lender. This period is generally 2 years.
  • You should have some monthly repaying capacity or the required minimum salary.
  • Business Continuity: At least 3 years (for self-employed)
  • Some banks may also require a minimum gross family income specified by the lender.

Home loan interest rate starts at 6.75% p.a. It varies across lenders and loan schemes. Home loan rates depend on several factors such as credit score of the applicant, quantum of the loan, repayment capacity of the applicant and tenure.

Lenders offer home loans either at fixed interest rates or floating interest rates.

1. Fixed Rate Home Loan

In case of fixed rate home loans, the rate of interest applicable at the time of loan disbursal remains same throughout the loan period. And because of the unchanged interest rate, the loan EMIs also remain constant.


Pros
  • Since the home loan rate remains constant, you will know exactly how much interest you have to pay for the loan, helping you plan out finances well in advance.
  • Again, since the rate remains the same throughout the loan tenure, you will be shielded if any time, during the loan tenure, the lending rates rise.

Cons
  • The interest rate for fixed rate home loans is usually 1% - 2.5% higher than the interest rate for floating rate home loan.
  • At any time during the loan tenure if the lending rates fall, the fixed interest rate will remain unchanged, giving you no benefit of the reduced EMIs.

2. Floating Rate Home Loan

In case of floating rate home loan, the interest rate is subject to change as per the change in the linked benchmark rate as published by the lender (such as Repo Rate) which in turn is dependent on several factors such as RBI policies and other external factors.


Pros
  • Floating interest rate home loans are cheaper as compared to fixed interest rate home loans.
  • RBI mandates no prepayment or foreclosure charges for individuals borrowing a floating rate home loan.

Cons
  • The only problem with a floating rate home loan is that its EMIs change with the change in the interest rate, which can create difficulty in planning expenses in advance.

Both types of home loan interest rates have their own list of pros and cons. When it comes to choosing between fixed and floating interest rates on home loans, pick the one that suits your needs the best.

Documents Required for Home Loan

Your home loan balance transfer is treated similar to a fresh home loan application by the bank you are transferring the loan to. Therefore, while applying for your home loan to transfer to another bank, all the documents provided during the initial home loan application need to be resubmitted. These documents are then revalidated and vetted by the bank or NBFC providing the loan transfer facility. Documents are the most important element while taking up a loan because they best help the bank to identify the loan borrower to make sure of their loan borrowing and loan repayment capabilities. The prerequisite key documents for home loan transfers are the following:

  • Passport-size photographs
  • Completely filled application form for transfer issued by the financial institution.
  • Latest three months' Salary Slips indicating break up of Gross salary that is the Basic Pay, House rent and Net Salary after deductions, if any.
  • Six months' bank statement, reflecting salary credits updated within 15 days before the loan application.
  • Identity Proof (Any One): Pan Card, Passport, Driving License or Voter's ID card or employee identity card (as identity proof and signature proof in case of government employees).
  • Proof of address
  • Proof of Age (Any One): 10th or 12th Marks Cards, PAN Card or Voters ID Card.
  • If you are a self-employed professional or businessperson, then instead of Points (3.) and (4.), you need to provide documents proving the existence of your business (for businesspersons) and academic qualifications (for professionals) ; and financial statements for both.
  • Bank statements from wherein the home loan EMIs were deducted amounting to last 12 months of the account.
  • The Loan statement copy and complete set of documents relating to the property that is currently in possession of the present home loan lender.

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Frequently Asked Questions

EMI refers to the ‘Equated Monthly Installment’ . It is the amount you will pay to us on a specific date each month till the loan is repaid in full. The EMI comprises of the principal and interest components which are structured in a way that in the initial years of your loan, the interest component is much larger than the principal component, while towards the latter half of the loan, the principal component is much larger.

Transferring your outstanding home loan availed from another Bank / Financial Institution to HDFC is known as a balance transfer loan.

Any borrower who has an existing home loan with another bank/HFI in which he/she have had a regular payment track of 12 months ,can avail a balance transfer loan from HDFC.

Yes. You are eligible for tax benefits on the principal and interest components of your balance transfer loan under the Income Tax Act, 1961. As the benefits could vary each year, please do check with our Loan Counselor about the tax benefits which you could avail on your loan.

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