Several initiatives introduced in the last two years have created a forward momentum in the real estate industry. For example, the mid- to high-value loan segments show signs of increasing popularity due to additional tax deductions declared in the Union Budget 2021 and interest rate subsidies.
That said, different lenders offer varying interest rates to a borrower. This disparity mainly arises from the risk of extending a loan to the borrower, calculated by factors like credit score, debt-to-income ratio, and down payment. It is also why facilities like home loan balance transfer are available, where an existing borrower can shift his/her housing loan to a different lender who offers better terms.
During home loan transfer to a different lender, the borrower will have to collect several documents from the existing lender and submit them to the new financier.
Here is a list of documents required for home loan refinance.
Documents to collect from the existing lender
- Property documents
The entire set of property documents has to be transferred from your existing lender to the new financier. These include the property purchase documents, registration and mutation certificates, ownership deed, payment receipts, etc.
- Consent letter
You will need to submit an official proforma notifying your existing lender about the home loan balance transfer and requesting a letter of consent for the same.
- No Objection Certificate
Your present lender needs to issue a NOC stating that your existing lender has no issues with you transferring the outstanding loan to a new lender.
- Foreclosure letter
Once the new lender settles the outstanding balance with your existing lender, a foreclosure letter will be issued declaring that your housing loan is foreclosed and no due balance is pending.
- Latest loan statements
You will need to collect a statement issued by your existing lender containing the EMI repayment track record details and the outstanding loan amount.
- Pending post-dated cheques
Collect the post-dated cheques submitted along with the original home loan application to your current lender.
Documents to submit to the new lender
- Property documents
Submit the provisional copies of property documents to initiate the home loan balance transfer process.
- Financial records/ proof of income
Your new lender will require proof of your repayment capacity, and hence you will need to submit documents like Form 16, the latest salary slips, and account statements for the last 6 months.
- KYC documents
These documents verify your identity, and you will need to submit at least one ID from your Voter’s ID, Aadhaar card, driving license, NREGA job card, or PAN Card.
- Address proof
These documents are to verify your residential address. You will need to submit at least one ID from your passport, Aadhaar, driving license, letter from a recognised public authority, residence address Certificate, or municipal or property tax receipt.
- Existing home loan documents
Submit your existing loan documents like loan sanction letter or loan agreement, consent letter, NOC, foreclosure letter, and home loan statements.
What to keep in mind when opting for home loan balance transfer?
There are several benefits to shifting your loan to a lender that extends lower interest rates. Borrowers who need additional funds to meet emergency requirements can opt for a top up loan when availing a balance transfer.
Moreover, depending on certain factors, borrowers might also be eligible for home loan tax benefit newly introduced in this year’s Union Budget.
Some financiers also extend pre-approved offers that expedite the loan application process. These offers are available on various products, including home loan, loan against property, etc. You can check your pre-approved offer by providing your name and contact number.
Finally, do a thorough analysis of all the savings and costs associated with the balance transfer facility. Borrowers can reap maximum benefits of a home loan balance transfer in the initial 4-5 years as they will be paying the highest interest component here.
Transferring towards the end of the existing loan tenor can work against you financially as you’d have already repaid a sizeable chunk of the interest part to your current lender.