Buying a house has always been a challenge. Earlier, the challenge was being able to afford a house. However, for a few decades now, with the help of banks and non-banking financial companies (NBFCs), affordability is no longer a challenge.
Now the difficulties start after the purchase has been made. Let us understand how.
With the limited options available in terms of location and size of the house, and your budget based on your past income, you made the best possible choice. In order to purchase the house, you researched all the available home loan options, compared them and chose the one that was most appropriate at that time.
Today,all the aspects may have changed and your loan may no longer be the best option. Thus, you would want to approach your lender to change the terms by either increasing the equated monthly installment (EMI) or reducing the rate of interest.
If the lender agrees to accommodate your request and make the necessary changes, it would be the ideal solution. However, if the lender does not agree, which is generally the case, you may have to apply for home loan transfer. Here, the outstanding loan is transferred to another lender offering a lower interest rate or better services.
A balance transfer is advantageous because you may save a lot of money over the long run. However, while it is easy to avail ofhome loans in India, a balance transfer is not simple. Here are five hurdles you may face when you apply for a balance transfer.
- Long and tedious procedure
Before you apply for the loan transfer, consider if going through the long and tedious procedure is worth your time and efforts. You will first need to check with the new lender if your loan is transferable. If possible, you must ask your existing lender for any available alternatives and the balance transfer procedure. You must remember that transfer will need paying some fees and charges.
- Extensive documentation
The paperwork involved in balance loan transfers is even more than that required while availing of a new loan. Over and above the regular paperwork required for a new loan, you would have to get a no objection certificate(NOC) from your existing lender.Furthermore, you need to apply with the new lender and complete the entire procedure again. Once the due diligence is done, you need to pay the requisite charges before disbursement.
- Risk for the new lender
Balance transfer does not change the ownership of the home. Only the home loan is transferred from one institution to another. You may benefit from lower interest rates; however, the new lender assumes the risk.
- Additional charges
The new lender considers your application as a fresh loan, which means you must go through the entire procedure again. You will have to pay the applicable fees and charges on the balance loan amount. Before going through the procedure, calculate the potential savings based on the fees and charges.
- Eligibility requirements
Before approving your application, lenders consider your age, balance loan amount, credit score, and tenure. It is possible that you do not meet all the eligibility criteria, which does not enable you to make the balance transfer.
The easy home loans’ availability makes owning your house possible. However, transfer your loan only if you are going to enjoy significant savings. It is important to conduct extensive research before making the decision.