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About Home Loan Balance Transfer

There are several players in the market who are providing Home Loan at competitive rates and unaware of this if you have availed a Home Loan from a lender whose rate of interest is much higher than what is prevailing in the market, you can go for a transfer of the outstanding balance to another bank/financial institution who is offering the loan at a much lower rate.

This transfer of the outstanding balance of the existing Home Loan from one bank/financial institution to another is Home Loan Balance Transfer. A Home Loan involves a huge amount and so even a small difference in the interest rate matters. So, if you feel that other lenders are providing the Home Loan at a much lower rate, then it is recommended to go for a Home Loan Balance Transfer.

After a few years of availing the Home Loan, you might want to avail a Home Loan top-up for repairs and renovation or extension of your existing house. If your present bank does not provide this facility, you can opt to transfer the balance to another lender who has this facility.

Key Features of Home Loan Balance Transfer

The Home Loan Balance Transfer involves the transfer of the outstanding balance in the existing Home Loan from the existing to another lender. This transfer involves a few procedures. They are:

  • The take over of the outstanding Home Loan balance from the existing lender is treated as a fresh loan by the new lender. All the requisites like a stable income, good credit score, and KYC verification will be mandatory. A prescribed application for the balance transfer has to be given along with the required documents. The assessment will be done like in the case of a new loan.
  • Scrutiny of property documents and valuation of the property will be done by the new lender once again. The panel advocate and the panel valuer of the new lender will be doing the scrutiny of property documents and the valuation of the property.
  • The transfer of balance will be allowed by the existing lender only after the loan has run for a minimum period as prescribed at the time of providing the facility. Until then, the No Objection Certificate (NOC) will not be issued by the existing lender.
  • The transfer of balance amount to pre-closure as far as the existing lender is concerned. So, pre-closure charges which range from 2% to 4% on the outstanding balance will be collected at the time of transfer. The charges will be included in the outstanding balance and the demand will be made from the new lender to an extent which is inclusive of these charges.
  • The new lender will treat the balance transfer like a fresh loan and hence processing charges will be collected at the prescribed rate, which ranges from 0.5% to 1% of the loan amount.
  • On transfer of the outstanding balance in the Home Loan from the existing lender to the new lender, the subsequent EMI becomes payable to the new lender.

Home Loan Balance Transfer - Eligibility

The following are the eligibility criteria for the Home Loan Balance Transfer:

  • The age of the applicant should be between 21 years to 60 years if salaried and 21 years to 65 years if self-employed or a businessman.
  • Salaried individual, self-employed individual/professional, and businessmen are eligible for the loan.
  • The minimum income criteria as per the lender whom you approach for the balance transfer should be complied with.
  • The work experience of a minimum of 2 years with the present employer is required for the salaried individual. The business vintage of 3 years of which at least 2 years of profit-making period is insisted.
  • The Home Loan account should have been conducted satisfactorily with the existing lender and the EMIs paid regularly.
  • The credit score of the applicant should be above 650. If the credit score at the time of availing the existing Home Loan was as per the required norms and during the few years has declined due to various reasons, the Home Loan balance will not be taken over by the new lender. The credit score at the time of request for balance transfer also should be as per the prescribed norms.
  • The debt to income ratio of 40% to 50% should be complied with

Documents Required for Home Loan Balance Transfer

  • Application Form: Prescribed application form for Home Loan Balance Transfer duly completed and signed.
  • Address Proof: Aadhaar Card, Voter's ID Card, Utility bills (latest), Driving licence, etc.
  • Photo ID Proof: PAN Card, Passport, Driving Licence, Aadhaar Card, etc.
  • Income Proof: For salaried individuals income proof like the latest salary slips, and form 16 is required. For businessmen audited financial statements like balance sheet and profit & loss account along with the ITR is required.
  • Passport size photographs of the applicant
  • Property documents: The chain of allotment letter, sale deed, tax paid receipts, khata certificate, approved plan, etc.
  • An NOC from the existing lender along with the details of the outstanding balance on the account and the conduct of the account is required. The existing lender should give a list of documents submitted at their end for availing the Home Loan.
  • Statement of the existing loan account for a period of one year should be submitted

How Can I Apply for the Home Loan Balance Transfer?

  • Before applying for a Home Loan Balance Transfer, you should have done a thorough study of the different rates for Home Loans prevailing in the market. Also, you should consider the other fees like the processing charges and foreclosure charges that will be applicable to the transfer of the outstanding balance.
  • Choose the best deal and then approach the lender for the takeover of the Home Loan
  • You will have to comply with all the eligibility criteria of the new lender
  • You will have to submit a prescribed application form for the Home Loan Balance Transfer along with the KYC documents, income documents and copies of the property documents to the new lender.
  • A letter from the existing lender with the details of the outstanding balance in the Home Loan account and a list of documents that have been submitted have to obtained and submitted to the new lender.
  • On approval of the take-over, obtain a sanction letter from the new lender and read the terms and conditions to ensure that there are no hidden charges.
  • The disbursal will be made by way of a cheque or draft or through RTGS directly into the existing Home Loan account.
  • The new lender will then collect the property documents from the existing lender and the equitable mortgage will be put through again in favour of the new lender.
  • Once the Home Loan balance is taken over, the subsequent EMIs should be paid to the new lender.

Is it Beneficial to Transfer the Home Loan Balance?

The Home Loan Balance Transfer is beneficial if the residual repayment period is considerably long. If there are only a few years like 4 or 5 years of the repayment period left, then it is not prudent to opt for the Home Loan Balance Transfer.

The benefit of saving on the price of the loan should not be arrived at based on the interest rate alone. You should consider the charges that will be collected for foreclosure by the existing lender and the processing charges by the new lender. On considering all this and any other charges like the fee for legal scrutiny of the documents and valuation of the property etc. if the price of the loan is considerably reduced, then you can go for a balance transfer.

Some of the banks give the advantage of extended repayment period up to the upper age limit at the time of maturity of the loan. With this, the EMI will also reduce considerably. If you want to ease your burden of EMI, you can go for this facility as well.

If you intend to avail a Home Loan top-up and your existing lender does not have the facility, then you can look for a new lender who offers the Home Loan at a competitive rate with top-up loan facility.

Top Banks Offering Home Loan Balance Transfer

Top Banks offering Home Loan Balance Transfer are:

  • SBI
  • ICICI Bank
  • Axis Bank
  • HDFC Bank
  • HSBC Bank

The features of the Home Loan Balance Transfer provided by the Top Banks are as detailed below:

State Bank of India

  • Eligibility: Home Loan availed from Private and Foreign Banks, Public Sector Banks, Scheduled Commercial Banks, Housing Finance Companies registered with the National Housing Board and Housing Loan extended to employees of Central/State Government Departments subject to fulfilling the eligibility criteria that is required to avail a home of SBI.
  • Quantum: Up to the balance outstanding of the existing Home Loan provided the income criteria and LTV are complied with.
  • Interest: Interest rates depend on the LTV and the loan quantum. The interest rate for salaried individuals is between 8.50% to 8.95% for women and 8.55% to 9% p.a. for the others. The interest rate for self-employed is between 8.65% to 9.10% p.a. for women and 8.90% to 9.20% p.a. for others.
  • Repayment: The maximum repayment period for Home Loan at SBI is 30 years and for the Home Loan Balance Transfer the residual years but with a maximum period up to 30 years or till the borrower attains 70 years of age whichever is earlier.
  • Processing fees: At 0.35% of the loan amount with a minimum of 2,000 and a maximum of 10,000 will be collected.
  • Pre-payment charges: No pre-payment charges will be collected

ICICI Bank

  • Purpose: Balance transfer of Home Loan availed at any Bank or NBFC can be transferred to ICICI Bank.
  • Quantum: The quantum depends on the income and repayment capacity as well as the outstanding balance in the existing Home Loan. A Home Loan top-up also will be permitted if the borrower is eligible.
  • Interest: Interest is in the range between 8.75% to 12% p.a.
  • Repayment: The repayment period will be the residual repayment period as per the original loan. Extended tenure will be permitted if the borrower is eligible.
  • Processing charges: 0.50% to 1% of the loan amount with a maximum of 1,500 and 2,000 for borrowers located at Bangalore, Mumbai, and Delhi.
  • Pre-payment charges: 2% to 4% of the principal outstanding on the day of pre-payment if the borrower has opted for a fixed rate of interest. Nil prepayment charges for loans with a floating rate of interest.

Axis Bank

  • Purpose: Balance transfer of Home Loan availed at any NBFC of Banks
  • Quantum: The quantum depends on the outstanding balance in the existing Home Loan subject to the maximum amount provided under the Home Loan of Axis Bank. If you are eligible for a higher amount within the maximum limit stipulated for Home Loan at Axis Bank, you can apply for a Home Loan top-up if you are need of funds.
  • Interest: Interest rates for salaried individuals vary from 8.90% to 9.10% p.a., depending on the amount if it is a floating rate of interest. Fixed rate of interest will be 12% p.a., irrespective of the amount. Interest for self-employed individuals/professionals and businessmen vary from 8.90% to 9.15% p.a., if the rate of interest is floating and if it is fixed rate, it is 12% p.a., irrespective of the amount.
  • Processing charges: 1% of the loan amount subject to a maximum of 10,000
  • Pre-payment penalty: Nil if the rate of interest opted is a floating rate. For a fixed rate of interest pre-payment charges at 2% of the loan amount will be charged.

HDFC Bank

  • Purpose: Takeover of Home Loan from other banks/NBFCs
  • Quantum: Up to the outstanding balance, as indicated in the foreclosure letter of the existing lender.
  • Interest: The interest varies from 8.55% to 9.40% for a floating rate depending upon the loan amount. For a fixed rate of interest with a resetting every two years, the interest varies from 9.40% to 1015% depending upon the amount.
  • Repayment: The period will be the residual period of the original loan. If the borrower is eligible for an extended tenure and opts for it, then period up to the maximum period permissible under the Home Loan will be permitted.
  • Processing charges: 50% of the amount with a maximum of 3,000 will be collected
  • Pre-payment charges: 2% of the outstanding loan amount

HSBC Bank

  • Purpose: Takeover of the home-loan from other banks/NBFCs
  • Quantum: Quantum up to the amount, as indicated in the foreclosure letter of the existing lender.
  • Interest: Interest at 8.85% to 9.05% p.a. to salaried individuals and at 8.95% to 9.15% for self-employed individuals.
  • Processing charges: 1% of the loan amount with a maximum of 10,000
  • Pre-payment charges: Nil

Home Loan Balance Transfer - Fees and Charges

The transfer of Home Loan involves certain fees and charges that differ from bank to bank.

The details of the variable rates of different charges are as given below:

Name of the bank Processing charges Pre-payment charges Penalty for delayed payment

SBI Bank

0.35% of the loan amount with a minimum of 2,000 and a maximum of 10,000.

Nil

2% above the normal rate on the overdue amount for the overdue period.

Axis Bank

1% of the loan amount with a maximum of 10,000.

Nil for a loan at a floating rate of interest. For a loan at a fixed rate of interest 2% on the outstanding loan amount.

2% p.m. on the overdue amount for the overdue period.

ICICI Bank

0.50% of the loan amount.

Nil for interest at a floating rate and 2% on the outstanding loan amount if the interest is at a fixed rate.

2% over and above the normal rate of interest for the overdue amount for the overdue period.

HSBC Bank

1% of the loan amount with a maximum of 10,000.

Nil for interest at a floating rate and for part pre-payment for loans with a fixed rate of interest if the part-prepayment amount is up to 25% of the outstanding loan amount no prepayment charges will be collected. If the prepayment amount is more than 25%, then 3% of the prepaid amount will be collected.

2% over and above the normal rate of interest for the overdue amount for the overdue period.

HDFC Bank

0.50% of the loan amount with a maximum of 3,000.

For other than salaried individuals, prepayment charges will be 2% on the outstanding balance. For the part-prepayment charges within 6 months from the date of the first disbursement, 2% of the part-prepaid amount will be collected and after 6 months and within 36 months, if the part-prepaid amount is up to 25% of the outstanding balance, then there will be no pre-payment charges. For the pre-payment amount above 25% of the outstanding balance amount, the charges will be 2% of the pre-paid amount.

2% p.m. on the overdue amount for the overdue period.

IDBI Bank

0.50% of the loan amount.

2% or 3% of the outstanding loan amount as per the sanction terms if interest is at a fixed rate.

If the interest charged is a floating rate no pre-payment charges will be collected.

2% p.m. on the overdue amount for the overdue period.

Yes Bank

2% on the loan amount with a maximum of 15,000.

2.5% on the principal outstanding for a fixed rate of interest. Nil charges for a floating rate of interest.

24% p.a. on the overdue amount.

Kotak Bank

2% of the loan amount

If pre-payment is before 12 months, the charges will be 6% of the outstanding loan amount and 5% if pre-paid after 12 months from the date of the first disbursement.

3% p.m. on the overdue amount for the overdue period.

Bank of Baroda

0.50% of the loan amount with a minimum of 7,500 and a maximum of 12,500.

Nil prepayment charges.

2% of the overdue amount for the overdue period.

Frequently Asked Questions

Does the transfer of Home Loan balance have an impact on the credit score?

If a Home Loan balance is transferred once and it has enabled you to get a longer tenure resulting in lowering the EMI which in turn helps you to be more prompt in paying the dues on the due date, then the credit score will improve. But if it is done again and again every time seeking a better rate of interest, it will not help much. Instead, your reputation as a potential borrower goes down in the market.

When is it ideal to consider a Home Loan Balance Transfer?

The EMI stipulated will consist of both the principal and the interest component. In the initial years, a large part of the EMI will be adjusted towards the interest and the rest will be towards the principal. So, the outstanding principal will come down only by a nominal amount. It is at this point in time that even a slight difference in the rate of interest will matter. If the residual repayment period left is very less, when the major portion of the EMI will be adjusted towards the principal and the interest payout will have come down considerably, it is not advisable to go for a Home Loan transfer. The reason being the cost that will be incurred on the pre-payment charges of the existing lender, processing charges and the legal vetting and valuation charges, stamp duty for documentation, etc., will be much higher than the amount that will be saved towards the interest out-go on account with a lower rate of interest.

What is the procedure for Home Loan transfer if there are two or three Home Loans for a single borrower?    

Having too many loans will create confusion in respect of due dates for payment and there are chances of missing out on the due date. Even though done unintentionally, it will reflect in your credit history, which is not an ideal thing to happen. The best way to get out of the situation is to merge all the three loans and go for a balance transfer to a new lender for a better deal.

Can a Home Loan top-up be availed from the new lender on the transfer of Home Loan balance?

If the new lender provides Home Loan top-up then, you can avail the Home Loan top-up subject to the eligibility criteria. The quantum and eligibility for a top-up loan depend on the outstanding balance in the existing home and the present income. The difference between the original sanctioned amount and the outstanding balance in the existing Home Loan and the increased eligibility amount as per your present income will be the amount of top-up that will be available for you.

What is the turnaround time for the Home Loan Balance Transfer?

It depends both on the existing lender and the new lender. Normally, it takes 7 to 10 days for the transfer to happen. The process can be expedited if applied online.

Will all the procedures like verification of KYC, eligibility, vetting of legal documents, and valuation of the property be done on Home Loan transfer by the new lender?

Yes. The entire process will be repeated since the new lender considers the Home Loan Balance Transfer like a fresh loan.

When should it be decided to think of a Home Loan Balance Transfer?

Ideally, when you have made such heavy investments by taking a loan of such high-value, you should keep track of the interest rate changes for the product in the market. If your existing lender is at par with the prevailing rates of the other lenders, you can continue to have the loan account with the same lender. When you feel that there are other lenders who are providing the facility at a much lower rate, you should negotiate with you existing lender for better rates as per the lowest rate prevailing in the market. Some banks do consider such requests based on the relationship of the customer, profile, and track record. If your existing lender agrees to offer the better rate then you can continue the account otherwise you should contemplate shifting the account to a lender who is offering the best rate.

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