Fulfilling the dream of owning a home is one of the biggest achievements in life and requires a huge capital investment. Banks and other financial institutions have fulfilled this aspiration of millions via Home Loans. Usually, Banks charge interest on a Home Loan that can range from 8.35% to 12%. This rate of interest varies based on the eligibility of the borrower and the lending institution.
Every borrower wants to save interest cost. The rate can be reduced either by negotiating with the existing bank or transferring the loan from the current bank to another bank at a reduced rate.
What is Home Loan Balance Transfer (HLBT)?
HLBT is a process that facilitates the borrowers to shift their existing Home Loan to another bank at a reduced or lower rate of interest. With this, the borrower can pay future EMIs to the new lender at the reduced interest rate.
The process starts with the submission of an application requesting for the foreclosure statement of a home loan with the existing bank. If the bank accepts the application, it will issue a foreclosure letter with current loan details.
Post the foreclosure letter the borrower will file a request for a Home Loan Balance Transfer with the new bank. If the new bank accepts the loan application, all the formalities with the previous bank will be completed and all the new EMIs will be paid to the new bank.
Thus, HLBT is beneficial for the borrowers who have a Home Loan at a higher rate but want to optimize their interest cost.
Reasons for Opting for a HLBT
There are several benefits that borrowers receive for getting their Home Loan transferred. Some of the reasons could be as follows:
Reduced monthly rate of interest
- Reduced monthly outflow (EMI)
- The borrowers can also negotiate with their bank to reduce the loan tenure.
- HLBT helps in the reduction of the amount of money the borrower has to pay interest on during the entire tenure of the loan.
- Banks also run special NIL fees offer on HLBT products from time to time.
- Steps for Home Loan Balance Transfer
The borrower has to perform the following steps to initiate the process of Home Loan Balance Transfer:
A borrower has to submit an application with the existing bank requesting for the foreclosure statement of a Home Loan.
On accepting the application from the borrower, the bank will issue a foreclosure letter including current loan details along with the details of the outstanding loan amount.
After receiving the letter from the bank, the borrower will request a Home Loan Balance Transfer to the new bank.
On acceptance of the application at the new bank, all the formalities with the old bank are completed.
After transferring the home loan, the borrower will pay all the EMIs to the new bank.
Eligibility for Home Loan Balance Transfer
Age: The minimum age for applying for a Home Loan Balance Transfer is 21 years for salaried employees. The maximum age for salaried employees is 60 years and 65 years for self-employed professionals and self-employed business owners.
Credit Score or Credit History: Good credit score and sound credit history is one of the important factors that affect the approval of the loan application. The borrower must maintain a good credit score. In case the score dips at the time of a loan transfer the bank may reject the loan application.
Repayments track on current Home Loan: The borrowers must have a clear repayment track of at least 12- 18 months on their current Home Loan.
Work Experience: The applicant must have relevant years of work experience. He or she must have at least 2 years of work experience with 1 year of work experience in their current organization. For self-employed professionals and business owners the minimum work experience required is 3 years in the same profession.
Documents Required for Home Loan Balance Transfer
The following documents are required to apply for a Home Loan Balance Transfer:
- Duly filled application form along with the passport size photographs signed across
- Identity proof (any one: Aadhar Card, PAN Card, Voter ID, etc.)
- Residential Address proof
- Age Proof (Any one: 10th or 12th Mark Sheets, PAN Card, Voter ID etc.)
- Office Address (Any one: Rent agreement, utility bills, lease deed etc) for Self-Employed professionals and Self-Employed Business owners
Income Proof (Salaried Employees)
- Bank statement of last 6 months
- Salary slips for last 3 months
Income Proof (Self-Employed Professionals and Business Men)
- ITR (last 3 years)
- Bank statement (last 1 year)
- Profit and Loss statement and Balance Sheet audited by a Chartered Accountant
- Audit reports and other financial documents
- Bank Statement showing Home Loan EMI deductions (last 1 year)
- Copy of the loan statement
- Complete property documents that are in the possession of the current financial institution