As per the TransUnion CIBIL report, the default rate of housing loans has witnessed a surge of 13 basis points on a y-o-y basis in the last quarter of September 2020. Resultantly, the NPA rate in India has become 7.5% in the third quarter of 2021-22. Furthermore, this rate is anticipated to rise more in the third quarter of September and October of FY 2021-22.
The Reserve Bank of India has kept the repo rate constant at 4% to control this issue, leading different lending institutions to lower home loan interest rates. Intending home buyers can benefit from this scenario and opt for a home loan balance transfer facility with favourable loan terms.
Steps to apply for a home loan balance transfer
Here is the step-by-step guide for borrowers to apply for a home loan balance transfer facility:
1- Firstly, individuals must submit a request letter to their existing lender for a balance transfer.
2- Existing lender will provide a NOC or consent letter and a statement stating the outstanding balance.
3- Next, borrowers need to apply for a new lender through their website by providing their personal and contact details. Next, individuals need to submit their income details to get the best deal that suits their financial requirements.
4- Now, applicants will need to furnish certain documents, after which a new lender will transfer funds to their existing lenders to foreclose the account. Thereafter, existing lenders will hand over property documents to the new lender.
4- After verifying documents, individuals need to pay the security fee to reserve their offer. Therefore, a representative of the respective financial institution will connect with applicants and proceed with the balance transfer process.
Borrowers must note that if they are applying for a loan refinancing, they need to undergo the entire home loan process again with the new lender. This thorough procedure may involve verification of property documents, technical estimation, credit appraisal etc.
The primary aim of a home loan balance transfer is to allow debtors avail reduced interest rates on their housing loans. Usually, this home loan balance transfer facility is specifically beneficial for individuals who have opted for home loans at higher interest rates and want to transfer the amount to a lender offering competitive interest rates.
In such cases, individuals can take the assistance of a home loan balance transfer calculator to estimate the difference and apply as per their convenience. Nevertheless, to avail of this facility, one needs to meet necessary eligibility criteria and submit necessary documents.
Eligibility criteria of loan refinancing
To avail this facility, one must have paid 12 loan EMIs without defaulting. Following are the eligibility parameters for both salaried and self-employed individuals-
Salaried
- Applicants must be within the age bracket of 23 and 62 years of age
- One should be a resident of India
- Must have a work experience of 3 years
Self-employed
- One must be an Indian resident
- Must be within the age bracket of 25 and 70 years
- One must have a business vintage of at least 5years
After meeting the home loan balance transfer eligibility criteria, individuals need to submit the following documents:
- KYC documents (address and identity proofs)
- Latest salary slips or Form 16 documents (salaried) / ITR documents and profit and loss statement of previous 2 years (self-employed)
- Bank account statement of last 6 months
- Documents of business proof that substantiates the business continuation of at least 5 years
Borrowers may need to provide additional documents during loan processing as per lender-specific requirements.
When to choose a home loan balance transfer?
Borrowers paying a huge interest amount on their housing loans, thereby putting financial strain on them, can choose better alternatives. This is the ideal time to think of a home loan balance transfer and conduct in-depth research regarding financers offering lower interest rates with favorable loan terms and maximum facilities.
Moreover, borrowers can opt for loan refinancing when the repo rate is unchanged, and housing interest rates are on the lower side. In that case, intending borrowers can take assistance of an amortization schedule to determine the EMI break-up and the perfect time for a balance transfer.
Additionally, the provision of availing pre-approved offers by reputed HFCs have benefitted the debtors as it reduces the hassle of loan documentation and lowers the loan application time. These offers are available on financial products like a home loan, loan against property etc. Borrowers can check their pre-approved offers by providing their names and contact details.
Therefore, home loan balance transfer offers multiple benefits to borrowers. However, they must make an informed decision after considering essential factors, such as additional charges or processing fees etc., to avoid any financial stress in the long run.