Top 5 Hurdles of Home Loan Balance Transfer.

Posted by Anurag Mishra on April 20th, 2017

Those who have taken home loan will easily understand the pinch of huge EMI amount and how a major part of your EMI will only go to the interest on loan at early stages. This is one of the main reasons why most of them think of home loan balance transfer. Home loan balance transfer is a process of transferring existing home loan into another banks or NBFC. This facility is taken usually if the borrower finds better services and lower interest rates at different bank.

In order to opt for this all you need to do is just to fill the Home Loan Balance Transfer application form along with calculating savings on top up and home loan balance transfer. Balance transfer option is chosen by most people as it will lower the monthly installments by paying lower repayment amount. Helps in saving a lot of interest that can be used on other useful things. It offers attractive interest rates that will turn your home loan to be much easier to the pocket and affordable.

Though there are lots of benefits of home loan balance transfer, the process is not as easy as it is considered. Apart from lot of additional formalities on home loan, it is equally important to keep in mind about the below hurdles:

Tedious Process:

The whole process of getting home loan transferred to a new bank is a very tedious procedure. Not many would like to transfer the home loan to different bank considering the procedure and effort required. The real question rises in every mind to judge whether the transfer will be more beneficial than the effort spent on transferring the loan in itself. Firstly the applicant will have to check with the new bank if they do take home loan balance transfer. If there is opportunity, then the applicant should check with the existing bank what the alternatives, procedure for loan transfer, fees and other charges are. On the basis of the home loan balance transfer has to be applied.

Open-ended Risk for New Bank:

It offers borrower an opportunity to move the existing loan to a different bank with lower interest rate and better services. There is no ownership transferring involved. It simply moves the home loan from one bank or NBFC to another one for more attractive benefits. Lower interest rates will help in increasing the savings.

Repayment of Fees:

As new bank will consider this as fresh loan application, along with re-doing the whole procedure, it is equally necessary to make the fee payments once again according to the percentage on outstanding loan amount. This is one of the main factors that should be considered and thoroughly calculated while applying for home loan balance transfer. The fee in itself can vary between 0.5% and 1% on the outstanding loan amount. Only if there is good savings from the home loan balance transfer it is advisable to make use of this option. Also if the home loan is for short tenure, then there will be not much savings if you considered the additional expense that you will have to bear to transfer loan.

Complicated Procedure:

Borrower will have to clear all pending payments to the bank and then the bank will check all the payments records and will accordingly issue NOC – No Objection Certificate. Only with this certificate from the existing bank, applicant will be able to transfer loan to a different bank. New bank will treat this type of application as fresh loan, thus the borrower will have to go through the entire loan approval process once again. This includes fees and other charges as well. Once all the due diligence is completed home loan will be transferred.

Apart from all the above listed ones, the bank will consider the location of the borrower, loan amount requirement, credit score, loan term, loan type and most importantly the age of the applicant before processing the home loan balance transfer. The younger you are, more benefits can be availed and getting loan will be easier for longer tenure from different banks. If you have a good track record of existing bank’s EMI payment, it will help you in home loan balance transfer in a hassle-free and simple manner.

If you think you are paying a huge interest rate on home loan with existing bank then it’s time to think of alternatives that are available. This is exactly when you need to think of home loan balance transfer option. If there are other banks that can offer loan at lower interest rates with maximum benefits, then grab the opportunity.

{Source: https://financebuddha.com/blog/top-5-hurdles-of-home-loan-balance-transfer}