Life is unpredictable. Things change when you least expect them to. All of us borrow home loans keeping in mind the loan EMIs we can comfortably afford. However, circumstances and situations can change, making it difficult for us to afford the EMIs we once found unaffordable. Are you in a similar situation? Are you finding it difficult to squeeze in your home loan EMIs within your current monthly budget? Or, do you think your credit profile has improved over time and you are now eligible for better housing loan interest rates? If yes, a home loan transfer could be the answer to all your problems. 

What is a Home Loan Transfer? 

Individuals repaying a home loan can transfer their home loan balance to another lender willing to offer better loan terms and conditions, such as a lower housing loan interest rate, extended loan tenor, etc. For individuals repaying a home loan on floating interest rates, closing one’s current loan account is possible without paying any penalty. However, for individuals repaying their home loan on fixed interest rates, a foreclosure penalty is applicable. More importantly, the new lender you choose to go with will also charge you a home loan transfer fee. The home loan transfer fee ranges from .25% to 2% per annum. Since there are charges involved which can in some cases go beyond the savings facilitated by the home loan transfer, one must decide to opt for a home loan transfer only after carefully weighing both the pros and cons. 

Home loan transfers are of two types: Internal and External. If you have been an excellent client and have always repaid your home loan EMIs on time, you can request your current lender to refinance your home loan on better terms and conditions. Lenders agree to this request as they do not want to lose good clients. On the other hand, internal home loan transfers should always be the first choice of home loan borrowers as they help borrowers save on the home loan processing fee. Being approved for a home loan transfer also makes it possible for loan borrowers to avoid the hassles associated with transferring one’s loan to another lender. 

External home loan transfers are transfers in the case of which borrowers transfer the remaining balance on their current home loan from their current lender to another willing to refinance the loan on better loan terms and conditions. In the case of external home loan transfers, your new lender pays off your current one and you then start paying home loan EMIs to your new lender. One can opt for these transfers only after acquiring written permission and NOC from their current lender. Further, borrowers must know that external home loan transfer applications are treated as new home loan applications and therefore, lenders ask for all the required documents for a home loan and process the application only when the applicant meets all the home loan eligibility criteria. 

Home Loan Transfers: Benefits 

1. The biggest benefit of a home loan transfer is that it gives borrowers the chance to negotiate for better loan terms and conditions, including lower housing loan interest rates and a loan tenor that is more suited to their repayment capacity. This not only makes loan repayment easy but also allows one to enjoy a better return on investment. However, as a thumb rule, if a lower housing interest rate is your key motive behind the home loan transfer, make sure there is at least a 25 bps difference in old and new home loan interest rates if the remaining tenor is 10 years and the difference must at least be 50 bps if the remaining tenor is 15 years. 
2. When you opt for a home loan transfer, lenders give you the option to go for a top-up loan. This top-up loan comes with no end-use restrictions, which essentially means you can use the funds availed of to take care of personal as well as professional requirements. Further, top-up loan interest rates are nominal and loan repayment tenor long, which makes loan repayment quite easy. 
3. Lastly, by switching to a different lender, you can also benefit from better customer service, which is very important when you are involved in a transaction that will go on for at least a few decades. 

Final Words

A home loan transfer is a highly beneficial facility. If opted for at the right time and with the right loan partner, it can make your life a lot more comfortable. So, make the most of this option available to you.