A home loan balance transfer is a strategic tool for lowering the cost of borrowing your home loan. If another lender is offering a lower interest rate and other better loan terms, then by transferring your home loan from the existing lender to the new lender, you can benefit greatly. The benefit of reduced interest outgo is reflected either in the form of a shorter loan tenure or reduced Equated Monthly Instalments (EMIs). But before you apply for a home loan refinance, it’s essential that you know about home loan transfer eligibility.
- Pay all your dues
One of the first home loan balance transfer eligibility criteria is that you should have no EMIs pending up to the current date. All your dues should be clear and there should be no default on your EMIs. This is primarily what determines your home loan balance transfer eligibility. This is also important because your existing lender needs to issue multiple documents which are required for the process and they will not do so if you have not met your EMI obligations to date.
- Wait out the lock-in period
Every home loan comes with a lock-in period of six months to one year. You cannot transfer your home loan before this period is over. Essentially, the lender requires you to pay a minimum number of EMIs before you can be eligible for a home loan balance transfer.
- Collect all the required documents
It’s important that you have all the documents required for a home loan balance transfer to be eligible for it. These include the No Objection Certificate (NOC), home loan statement, foreclosure letter, etc., from your existing lender along with KYC and property documents. Having all these documents required for a home loan balance transfer is essential to ensure that your home loan transfer eligibility is not impacted.
- Improved financial profile
Your home loan balance transfer eligibility can be enhanced if your financial profile has improved since you applied for the home loan. For instance, if your annual income has increased or your credit score has significantly improved, then your home loan balance transfer eligibility also increases.
While you check your home loan transfer eligibility, you also need to ensure that this will be a wise financial decision. For this, you need to not only consider how much interest you will save but also what costs you will have to bear. For instance, you will have to pay processing fees and prepayment charges. If the cost of transferring your home loan is greater than the benefit of the lower interest rate, then it would not be of any help to opt for home loan refinance. To figure this out, you can make use of a home loan balance transfer calculator. This free, online tool comes in handy to conduct a cost-benefit analysis. It will calculate your interest savings by taking in data about your existing loan and the new home loan offer of the new lender.