Let’s say you walked into a supermarket, put some products inside a shopping cart, and walked to the cashier’s desk. Upon completing your payment, you realize that the cashier charged more than what the receipt stated. However, despite being courteous, the cashier doesn’t listen to your complaint. What would you do? Most likely, you’d make sure to never shop there again.
The above scenario is just like that of wanting a home loan balance transfer. Imagine taking a home loan from a lender whose customer service delivery is poor and worse – who is still charging you a higher rate of interest than its competitors.
However, we advise you to research any lender before applying for a home loan. Simple research prevents you from doing business with high-handed lenders. Even if you have already taken a high-interest loan, a balance transfer helps you to right that wrong.
In this article, you will learn some valuable information about a home loan balance transfer before initiating one.
What is a Home Loan Balance Transfer?
A home loan balance transfer, or loan refinancing, is an option to switch between lenders. A balance transfer becomes necessary if you are no more pleased with your lender’s terms.
When you complete the transfer, the new lender pays your loan balance to the existing lender, thereby closing your account with the previous lender. The following are more details about it.
Three Points to Consider Before Initiating a Home Loan Balance Transfer
Are you looking for a home loan? Below are three key points to note before opting for a balance transfer of your home loan:
1. Know the Fees Applied
It will cost a certain amount to move to a new lender, so it’s wise to determine the amount in advance. This amount comprises charges, such as processing fees, application fees, inspection charges, administrative charges, etc.
Using an online calculator is an effective way to do this. It’s fast and displays authentic information.
2. Know Your CIBIL Score
You should know it that your credit score plays a vital role when applying for a home loan balance transfer because it determines your eligibility. If you have been inconsistent in paying the equated monthly instalments (EMI) on the loan, your credit score drops.
This portrays you as a high-risk borrower and makes it highly unlikely for you to get approved for a balance transfer.
3. Study the Terms and Conditions
One great mistake common among borrowers is that they don’t read the new lender’s loan agreement. It’s smart to read the fine print before signing anything.
By doing so, you avoid hidden charges. Remember, the transfer is meant to benefit you and not the other way around.
How Does a Home Loan Balance Transfer Work?
Here is a step-by-step guide for a home loan balance transfer:
1. Negotiate with Your Existing Lender
Before applying for a balance transfer, ensure that you speak with your lender to request better terms. If this is unsuccessful, proceed to apply.
2. Get a No Objection Certificate (NOC) from Your Existing Lender
You will need a NOC to process your transfer application, so request a copy.
3. Retrieve Your Documents
Since you are looking to close your account, ensure that you collect the documents previously submitted. These will be transferred to the new lender. Do well to recover any post-dated cheques submitted to the current lender.
4. Submit the Documents to Your New Lender
After getting the documents, submit them to the new lender. These documents will remain in the custody of the new lender until you complete the loan repayment. It is very simple process.
5. Close the Loan Account
After the new lender pays the balance, your account with the old lender is deemed to have closed.
6. Open a New Loan Account with Better Terms
Now’s the time to enjoy perks like a reduced interest rate and a longer tenor.
While a home loan balance transfer can save you from burdensome loans, you’re most likely not going to get the best out of it if you don’t follow the right steps. You may not even get approval at all. Before applying for a balance transfer, ensure that you meet the new lender’s eligibility requirements. This increases your chances of getting your transfer request approved.