Despite three consequent deductions in repo rates already by October 2020, home loan borrowers may still be waiting for loan revision dates when lenders reduce the charged interest rates. This difference in the provisional reset date often creates dissimilarity in the interest rates charged to existing and new applicants.
In such situations, borrowers can opt for a home loan balance transfer facility, which allows them to shift to a lender offering advantageous service terms. This shift can be extremely beneficial for applicants who applied for a loan under the older base rate or MCLR regime and cannot enjoy the reduction in interest rates even after RBI’s revisions.
Documents required for home loan refinance
To avail the services of home loan transfer, one would need to submit the documents listed below.
- Consent letter
Applicants will need to submit a formal application to their existing lender, notifying them about this impending balance transfer and ask for an official consent letter.
Your existing lender needs to provide a NOC, which states that the financial institution has no issues with you shifting your outstanding balance to the new lender.
- Loan agreement
A sanction letter and the original loan agreement are required to begin the process of a home loan balance transfer.
- Home loan statement
One can collect this document from his/her original lender. It reveals the official loan history, highlighting the EMI payment track record and schedule. This document should also reflect the outstanding loan amount that you will finance from the new lender.
- Foreclosure letter
Once your new lender disburses the loan amount, you need to collect a foreclosure letter, stating that no outstanding dues are pending with the original lender. Make sure you know the dos and don’ts of home loan foreclosure.
- Post-dated cheques
Collect all post-dated cheques from your existing lender that you submitted while obtaining the original loan.
- KYC documents
You need to provide fresh KYC documents to your new lender, including a proof of identity and proof of address. You will find complete details about the required documents on the financier’s website.
- Financial documents
Provide financial documents supporting your repayment capacity. These should include Form 16, salary slips for the last three months, and bank statements for the previous six months.
- Property-related documents
Finally, you need to provide a copy of property-related documents that verify the purchase of your property. These include a NOC from the builder, registered sale agreement, occupancy certificate, and a copy of stamp duty papers.
Eligibility for a home loan balance transfer
A home loan transfer is treated as a new application, and you need to meet specific eligibility criteria to transfer your existing balance. Although the eligibility criteria vary among lenders, usually you will have to meet the following requirements mandatorily:
- The intended property should be ready to occupy or one that is occupied already and not under construction.
- Some financial institutions mandate that you need to repay a certain number of EMIs before you can opt for a balance transfer.
- Your existing loan should not carry any dues outstanding.
What to look for when opting for home loan refinance?
While you need to make sure that you meet the requisite eligibility criteria, there are certain factors you need to keep in mind before choosing your new lender.
It is recommended that you opt for balance transfer early in the loan tenure. If you opt for a balance transfer after 5-6 years, you will have already repaid a significant chunk of the interest to your existing lender.
Ask your new lender if there are provisions for a top up loan facility, where applicants can avail a top up over the existing home loan amount to meet emergency financial needs.
Some financial institutions also offer pre-approved loans to make the experience quick and hassle-free. Usually, such offers are available on products like home loan and loan against property. You can check your pre-approved offer using your credentials, such as name and phone number.
There are several reasons to refinance your home loan, especially for borrowers who pay fixed interest rates on home loans. To make an informed choice regarding home loan balance transfer, one must stay thoroughly acquainted with required documents, eligibility criteria, and additional benefits.