A home is perhaps one of the biggest investments you will ever make and hence a home loan is the biggest debt you will ever take on. Even if you can get a slightly lower interest rate, it will save you a lot of money in the long term and hence considering a home loan balance transfer can be prudent. A balance transfer allows you to transfer your existing home loan from your current bank to a new bank that is offering you a lower interest rate. Since home loan tenures are long-term 15-20 years, such a change can help you save a significant amount of money. Before you apply for a home loan balance transfer; however, it’s essential to know what determines your eligibility.
Just like any other loan, your home loan balance transfer eligibility and your home loan balance transfer interest rate depend upon your age, income, and existing levels of debt. But in addition to these basic factors, here are three things that also have a significant impact on your home loan balance transfer eligibility:
- Your loan repayment track record and credit score impact your home loan balance transfer eligibility. This is at two levels. First, you need to ensure that you have not missed out on any of your home loan Equated Monthly Installments (EMIs) and that there are no outstanding dues. Second, you also need to make sure that if you have any other loans, you don’t have pending dues there either. This is because that will impact your credit score which, in turn, will impact your home loan refinance eligibility.
- How far along you are in your loan also matters. If you are in the later stages of your loan and most of the amount has already been paid, opting for a home loan balance transfer would not be of much help. Conversely, if you have just started paying off your loan, you need to first complete the minimum EMI payments or the lock-in period with your current bank. This can be anywhere between 6 to 12 months.
- Your home loan balance transfer eligibility will also depend on whether you have all the required documents in place. Documents required for home loan balance transfer range from property papers like occupancy certificate to documents required from your current bank like a sanction letter and the loan account statement for the past year. This is in addition to your identity proof, address proof, and income proof documents.
Depending on these factors, you can negotiate better terms and a better home loan balance transfer interest rate with the new bank. You can also check out home loan balance transfer eligibility calculators as most banks have such helpful tools on their websites. This can help you get an idea of your eligibility, the interest rate, and what your new EMI will look like.