The prices of homes in India have sky rocketed in the last decade, to the level that it is almost impossible for individuals to buy a home with just their savings. Even the slight chance of possibility comes with compromise made on location or space.
Even with the availability of multiple credit options and offers from lenders, the buying of a home is a long-term investment and a very costly one for the common man.
While loans get you closer to your dream home, there are many issues that come with repayment of a loan, this includes longer term periods and interest rates.
A small respite comes in the form of a balance transfer. This is the option where the borrower can transfer the home loan balance from their existing bank to another bank at much lower rates.
We can understand the balance transfer better through Rajiv’s story.
Rajiv took a loan from HDFC at an interest rate of 10.83%. He has taken a loan tenure of 25 years and is currently in his 6th year of repayment. During this time, he notices that SBI offers home loans at 10.30%. Now Rajiv is intrigued and comes home and calculates the loan amount after loan transfer and the reduction in interest rate does save him a considerable amount of money.
So, Rajiv decided to transfer his home loan balance to SBI. He approached HDFC asking the procedure to transfer the loan balance.
On the other side, Rajiv also came to know of the procedures that SBI had for the balance transfers.
Balance Transfer eligibility
Borrower should satisfy the eligibility criteria for availing home loan as per the banks instructions
The borrower should have serviced interest and/or instalment of the existing loan regularly, as per the original terms of sanction
The borrower has valid documents evidencing the title to the house/flat
Procedure for Balance Transfer
- The borrower should address a letter to the bank/ financial institution from whom he has availed the loan asking them to deliver, immediately upon receipt of the loan amount, the title deeds and other securities, if any, direct to our lending branch;
- The borrower should give to the branch a request letter for paying to his existing lending bank / financial institution the outstanding amount of his loan by debit to his loan account;
- The borrower must give an advice of the actual outstanding (with up-to-date interest) in the loan account from the other bank/ financial institutions;
- the statement of Account for the entire period of loan or for the last 10/12 months where the loan has run for a longer period;
- Confirmation letter from the financing bank that they have created an equitable mortgage over the property.
Documents required for availing the loan
- Agreement to create mortgage.
- Power of Attorney in the favor of the Bank authorizing the Bank to create equitable mortgage on the borrower’s behalf.
- Interim security (Ex: Bank Deposit Receipts, LIC Policies, etc.) and the security obtained in the interim period will be released after receipt of the title deeds then the other Bank and creation of a valid equitable mortgage after verification of the borrower's title to the property.
Required loan documents.
Following these steps Rajiv transferred his home loan and saved a lot of money in the processed.
Do note that the banks mentioned are for representative purposes, please check with the lenders directly on the latest rates and processes.