What Do You Need to Know About Transferring Your Home Loan

As you know, a home loan transfer, also known as loan refinancing, is when you move your existing home loan from one lender to another. People do this to get lower interest rates, better loan terms, or improved customer service.

People transfer the loan to other lender for the below reasons:

1. Lower Interest Rates: One main reason to transfer a home loan is to get a lower interest rate. A lower rate can reduce your monthly EMI and the total interest you pay over the loan period.

2. Better Loan Terms: Transferring your home loan can also offer better terms, like a longer tenure to lower your monthly EMI or a shorter tenure to pay off the loan faster.

3. Improved Customer Service: Bad customer service from your current lender can be a big reason to switch. A lender with better service can make the process smoother and easier.

4. Top-Up Loans: Some lenders offer a top-up loan facility with the home loan transfer. This allows you to borrow additional funds over and above the existing loan at a relatively lower interest rate.

How Does Home Loan Transfer Work?

First of all let's understand an example:

Transferring your home loan can lead to significant interest savings. For example, let’s say you have a home loan of ₹30,00,000 with an interest rate of 8.5% per annum and a tenure of 20 years. Your current EMI is ₹25,900, and over the 20-year period, you will pay a total interest of approximately ₹36,16,732, making your total repayment ₹66,16,732.

Now, suppose you find a new lender offering a lower interest rate of 7% per annum for the same tenure of 20 years. With this new rate, your EMI would drop to around ₹23,055. Over the same 20-year period, you would pay a total interest of approximately ₹24,33,825, making your total repayment ₹54,33,825.

By transferring your loan, you save about ₹11,82,907 in interest payments (₹36,16,732 - ₹24,33,825).

How to apply for loan transfer step by step process:

• Look for lenders offering lower interest rates and better terms.

• Use home loan transfer calculators to estimate how much you could save. Make sure that these savings are greater than the costs of transferring the loan.

• Submit an application with the new lender.

• Provide necessary documents such as loan statements, identity proof, property documents, and income proof.

• Upon approval, the new lender will issue an offer letter. This includes the loan amount, interest rate, tenure, and terms.

• The new lender checks the property’s legal and technical details. They also assess your credit score and ability to repay the loan.

• The new lender pays off the remaining loan amount to your current lender. Your current lender then provides a No Objection Certificate (NOC) and closes the loan account.

• You sign a new loan agreement with the new lender. Start paying EMIs to the new lender.

When is the Best Time to Transfer?

Below are a few points to understand but these points are not limited. Make sure you to evaluate based on your current financial obligations:

• Early in the Loan Tenure: The best time to transfer a home loan is early in the loan tenure. At this time, most of your EMI goes towards paying interest rather than the principal.

• Change in Financial Situation: If your finances have improved, like getting a higher income or a large sum of money, you can transfer the loan to shorten the tenure and pay it off faster.

• Decline in Interest Rates: If interest rates have dropped since you took your original loan, it’s a good time to transfer your loan to take advantage of the lower rates.

How Much Money You Can Save?

First of all, the money you save from the home loan transfer is from “interest”. When you transfer the home loan one of the main reasons for transfer is to save interest. There is noting in principal payment all the saving are in Interest payment

Second, how much amount you can save completely depends on the “time” you transfer the loan amount. Let’s say at the beginning of the tenure of a home loan the interest rate is usually higher than at the middle it remains the same as principal, at the end the principal is high.

Are There Any Tax Benefits?

Section 24(b) of Income Tax Act

Interest paid on home loans is eligible for tax deduction under Section 24(b) of the Income Tax Act, up to ₹2 lakhs per year for a self-occupied property.

Section 80C of Income Tax Act

Principal repayment of home loans qualifies for tax deduction under Section 80C, up to ₹1.5 lakhs per year.

Conclusion

Transferring a home loan can be a smart move if done right. Understand the process, check for savings, and consider tax benefits to make a good decision. Compare lenders, calculate costs, and make sure the new loan fits your financial goals.

How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.

Check the details here at EazyBankLoan

Need help? Reach out at support@eazybankloan.com

Frequently Asked Questions (FAQs)

1. Can I transfer my home loan if I have a low CIBIL score?

• It might be challenging, but not impossible. Improve your CIBIL score before applying for a loan transfer to get better terms.

2. Are there any prepayment penalties for transferring a home loan?

• It depends on your current lender. Check the terms of your existing loan agreement for any prepayment penalties.

3. Are there any tax benefits for transferring a home loan?

• The tax benefits remain the same as your original home loan, subject to the interest and principal repayment under Sections 24(b) and 80C.

4. What are the charges involved in a home loan transfer?

• Common charges include processing fees, legal and technical fees, prepayment penalties, and stamp duty.