The home loan market is seeing an increasing number of financial institutions vying to attract customers with competitive interest rates. If you find a lender whose home loan features are more beneficial for you, you can consider switching your loan to that lender.
What is Home Loan Transfer?
Financial institutions can take over a home loan from another lender through loan transfer on the request of a borrower. They can also offer top-up loansover and above the home loan amountduring the transfer.
The outstanding loan amount is paid off in full by the new lending institution, and the borrower repays the new lender in Equated Monthly Instalments (EMI)s. Balance transferis also known as refinancing of the loan.
Why consider Home Loan Transfer?
If you are unhappy with the interest rate of your existing home loan, you can switch to other financial institution that offers a lower interest rate. Apart from the interest rate, longer loan tenures and better customer service can influence your decision to transfer the loan to another lender.
Your savings through refinancing will depend on the following factors.
- Outstanding Loan Amount
- Loan Tenure
- Prepayment charges and other fees that may be incurred due to switching
- Current and revised EMI on transfer
Eligibility for Home Loan Transfer
Any salaried professional or a self-employed individual who has availed a home loan from a financial institution can request a loan transfer. Also, the borrower needs to meet the following essential eligibility criteria:
- Age between 18 to 65 years
- Must have a good credit score at the time of refinancing. Even if your credit score were acceptable during the original loan application, the new lender would look at your current credit rating during the transfer application.
Knowing the Home Loan Transfer Process
Switching your home loan to another lending institution entails the following steps:
- Obtaining all documents of your home loan from the current lender
- Getting a letter on the letterhead of your existing lender listing all the property-related documents held by them
- Providing necessary loan documents to the new lending institution you plan on switching to
- The new lender would provide an in principle approval after assessing your eligibility based on their processes and polices
- Paying off the home loan in full by your new lender
- Closure of the old loan account
- Starthome loan repaymentswithyour new lender
Tax Benefits on Balance Transfer
Borrowers willing to switch to a new lender can be worried about any tax benefits they might lose due to the transfer. It may be heartening to know that the principal and interest paid after the Home loan balance transfer are eligible for tax benefits under the Income Tax Act, 1961.
Borrowers who are worried about the rising home loan interest rates can take comfort in the fact that they have an option to refinance their loan. However, it is important to calculate othercharges involved to ascertain the extent of benefits in transferring loans to another lender.