Buying a home is one of the biggest decision a person makes in their life. It continues to be a costly affair which one cannot pay with a single down payment due to the cost of houses being very high. It is for this purpose people opt for home loans using which they can get their dream home and repay the money borrowed in the form of monthly instalments or EMIs. 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)?
If a person feels that they can get better terms from another bank on their home loan which they had previously availed, they can transfer the home loan from existing bank to the new bank.
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.
The new bank will settle the balance amount to be paid to the existing bank in full and take up the loan based on the terms finalized with the borrower.
Every customer has to satisfy the Know Your Customer (KYC) norms stipulated by RBI. You have to provide the documents relating to your KYC, employment, business, and income.
- PAN Card
- Aadhar Card
- Voter ID
- Driving Licence
- Registered Rent agreement
- Aadhar Card
- Driving License
- Lease agreement
- Latest Gas or electricity bill
Financial Documents – Employment or Business Proof
- Salary slips for the last 6 months in case you are a salaried employee (In addition, you can provide IT returns for the past 3 years along with Form 16)
- IT returns for the past 3 years in case you are self-employed (Some banks accept 2 years IT returns as well)
- Statement of A/c for the past 1 year where your salary is credited (in case of salaried people)
- Profit and Loss statement and Balance sheet for the last 2 years in case of self-employed persons
- Sales tax, GST registration certificates, if applicable
- Partnership deed in case of partnership firms (if the applicant is one of the partners)
- Certificate of Incorporation in case of limited companies(if the applicant is one of the directors)
- Loan application form duly filled in
- Signature Proof
- Copies of all property documents that can establish the chain of ownership for the past 30 years
- Encumbrance certificate for 30 years
- Property tax paid receipt in case you reside in the property being mortgaged (usually when you apply for Home Loan Balance Transfer)
Low Interest Rates
No Hidden Charges
No Pre-Payment Penalty
Interest charges on Daily Reducing Balance
Home Loan Available as Overdraft
Interest Concession for Women Borrowers
On completion of this process, you will be able to choose the offer that suits your requirements. You should keep your documents and the application forms ready. Uplaxya Consultants Pvt. Ltd. has a special team to assist you in this regard at no extra cost.
The process for Home Loan Balance takeover is as follows
- You can apply for the balance transfer by visiting the Bank’s website or by visiting the nearest branch to finalize on your loan terms.
- Once your loan terms are finalized with the bank you need to submit a letter to your current lender requesting your home loan be closed and get a NOC which will take at least 3 weeks.
- Once the NOC is obtained you will need to submit it to the Bank along with all the documents that are required by them, who after verification will pay your balance to your current lender. The current lender then will issue a foreclosure certificate which should also be submitted to the bank. The borrower can now commence paying the EMI with new loan terms decided with the Bank
Home Loan Balance Transfer Frequently asked questions (FAQ)
Home Loan Balance Transfer is an option available to someone who has a current home loan, to move the loan to another bank. The incidence of such balance transfers is on the rise since banks are competing to grow their home loan portfolio and offer good terms to customers wanting to switch their home loan. The fact that the customer does not need to pay a penalty to the existing lender, makes the transfer cost inexpensive.
The borrower can use the top up for any personal or business purpose eg. home renovation, medical or education expenses, repaying other high-cost loans or credit card dues, business expansion etc.
Most banks lend as per the under-mentioned grid, provided the borrower can demonstrate the ability to repay the loan amount.
|Loan amount||% of Cost of Property|
|a) Up to 25 Lakhs||90%|
|b) More than 25 Lakhs & up to 75 Lakhs||80%|
|c) Above 75 Lakhs||75%|
Few institutions even go up to 90%, for select borrowers / properties, even for (b) and (c) above.
Your loan eligibility is determined after looking at the following:
- Your current Income
- The nature and continuity of your employment
- Your current obligations i.e. the installments (EMIs) you are currently paying, your credit card balance, other credit limits availed
- Your credit history
- The lending bank or institution will also consider which property you had purchased when you initially availed the home loan. In the event it is a property under construction by a developer, the credibility of the developer and past performance on their projects will also determine how much the lender is willing to lend against such a property. Lenders normally do not offer a top up loan where the property is still under construction. An exception could be made where the initial home loan availed was lower than the maximum allowable percentage of property cost as per regulation.
- The end-use/purpose of availing a top up is also discussed with the lender and may have a bearing on the loan sanction
- 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.
There is nothing like a free lunch in this world. Therefore, you should be ready to pay the processing fees for your housing loan. Is this the only charge you will incur? It depends from bank to bank. Some banks charge less processing fees, but may make up for that somewhere else. On the other hand, some banks and financial institutions consolidate their charges and include them in the processing fees. Let us look at some common charges you will most likely incur when you apply for a home loan.
- Upfront fee for processing –Many banks charge an upfront fee for processing your application. This is usually in the range of 3000 to 5000. This is a non-refundable fee, even in case the bank rejects your loan application. In case they sanction your loan, they adjust this fee in their regular processing fees.
- Processing fee –This amount ranges from 0.25% to a maximum of 2% depending on your employment status. Salaried employees incur a smaller fee whereas self-employed professionals and business persons have to pay more. Some banks do have a uniform rate. Note that you have to pay GST @ 18% on this processing fee.
- Valuation charges –Many banks charge for the valuation of the property. They have independent evaluators on their panel. These banks have a fixed structure of payment. Some banks insist that the customer pays to the bank whereas some of them include this amount in their processing fee structure.
- Legal scrutiny charges –Legal scrutiny of the property is mandatory. The financing bank has to ensure that you get a clear title to the property so that the mortgage holds well in law. Therefore, they have a panel of legal experts who carry out the search for a period of 30 years. You need to supply the property documents to these advocates to allow them to do the needful. Some banks ask the customer to pay the advocates separately whereas many banks include these charges in their processing fees.
- Mortgage registration charges –The prime security for the home loan is an equitable Most of the states in India require you to register the equitable mortgage in the bank’s favour. Under such circumstances, you incur stamp duty and registration charges. The equitable mortgage does not attract stamp duty in some states like Rajasthan. However, in states like Tamil Nadu, there is a stamp duty of 1% of the loan amount subject to a maximum of 25,000. In addition, you have to pay 5,100 as registration charges. Be aware of these additional expenses when you avail Home Loan.
- Pre-EMI charges –Some banks have the system of charging pre-EMI charges. Ascertain these charges beforehand.
- Insurance –Taking out insurance for the property is mandatory. At the same time, many banks and financing companies bunch a lot of their products like loan insurance, Mediclaim family floater policies, accident insurance, and critical illness cover, etc along with the loan. They provide the financing for the premium as well. Of course, you have to repay the same in your EMI. In a way, it is good to have these insurance policies because life is uncertain. In case something happens to the breadwinner and the principal borrower, the insurance can take care of the liability. However, other than the property insurance, all the other policies are optional. You can refuse to take them.
Yes, it is because it increases your overall eligibility. You can show the income of both applicants together. The bank has a higher leverage ratio under the circumstances. However, there are many restrictions on the nature of the relationships between the co-applicants. The following persons are usually accepted as co-applicants.
- Daughters (unmarried)
Financial organisations are reluctant to accept daughters as co-applicants for the simple reason that they might get married in the future become part of another family. Similarly, they do not accept siblings as co-applicants because each sibling would have their individual liabilities. One of the advantages of having a co-applicant is that it increases your chances of approval.
The cheapest loan is not necessarily the best option. There are better options that can prove beneficial in the long run.