How Property Loan Balance Transfer Can Help You Save on Interest Payments?

Property loans are large financial commitments that require borrowers to carefully plan out their affordability to pay off the monthly installments. Longer tenure and high-interest rates may substantially increase the overall repayment amount, which the borrower might find difficult to repay. As a result, borrowers often opt for property loan balance transfers.

The balance transfer procedure offers borrowers the opportunity to decrease their aggregate repayment sum and secure improved loan terms, leading to timely repayment. In other words, a balance transfer can help debtors save on interest payments. The article below discusses Loan Against Property (LAP), eligibility and required documents, and more.

Understanding property loan balance transfer

A property loan balance transfer allows borrowers to transfer their pending home loan repayment to other lenders. This process allows borrowers to restructure their loan agreement, thereby securing more favorable loan terms, including reduced interest rates and favorable repayment schedules.

This way one essentially cuts down on repayment obligations, eventually lowering the interest amount. To proceed with a balance transfer, the borrower must first acquire a letter of consent from the current lender, along with documentation that details the outstanding loan balance.

These documents are then presented to new lending institutions. Following this, the new lender disburses payment for the existing loan balance, subsequently establishing a fresh loan account for the borrower that incorporates updated terms and interest rates.

How does a property loan balance transfer save interest payments?

A loan balance transfer can be an excellent way to bring down EMIs and save on interest. Here is how one can make the most out of a home loan balance transfer. 

Lower interest rate

Typically, borrowers opt to transfer their home loan balance to lenders that provide more favorable interest rates. The resultant reduction in interest charges leads to a decrease in the monthly repayment obligations, creating a more manageable and convenient payment structure. Consequently, borrowers can direct the surplus funds towards other important areas, now that their monthly obligations have been reduced.

Reduced loan tenure

While shorter repayment tenures may lead to higher monthly EMIs, the ultimate result is a reduction in the overall interest paid throughout the loan. Through the utilization of a home loan balance transfer facility, borrowers can select a new lender that provides a shorter repayment term, which leads to significant interest savings over the loan’s lifespan.

Better customer service

In addition to seeking lower interest rates and flexible repayment terms, borrowers also place great importance on the provision of top-notch customer service. Should a borrower find themselves dissatisfied with the level of service received or if they discover other lenders offering superior services and support, they may choose to pursue a balance transfer.  

Top-up loan

Home loan balance transfer also allows borrowers to opt for a top-up facility. Here, they can avail additional loans on top of their existing outstanding loan. Notably, the benefits of the new loan term and reduced interest rates extend to the top-up amount as well. 

Furthermore, borrowers with long-standing relationships with reputed lenders get to avail pre-approved facilities on home loans and LAPs. Pre-approved loans cater to faster loan sanctions. One can visit their respective lender’s website to check their eligibility for such offers. 

What are the documents required for loan against property?

Borrowers need to furnish the following documents to apply for an LAP:

Identity and address proof

PAN card, voter ID card, driving license, passport, utility bills, Aadhaar card, or any government-approved photo identity proof or address proof

Income proof

Income proofs for salaried and self-employed individuals are as follows:

Salaried individuals 

Latest salary slip, last 3-month bank account statements, Form 60, or Income Tax Returns

Self-employed individuals

Last 6-month primary bank account statement, IT returns, balance sheet and profit and loss statement

Property documents

Title deed, buyer agreement, property tax receipts, etc.

Miscellaneous Documents

Self-employed individuals have to show document proof stating business continuity for at least 5 years

What are the eligibility criteria to apply for a property loan balance transfer?

Eligibility criteria for salaried and self-employed individuals are as follows:

1- For salaried or professionals

Eligibility for salaried bodies is as follows

• Nationality: Residing Indian citizen
• Age: Generally around 23 to 62 years
• Employment: Government or private sector employee with a service record of at least 3 years

2- For self-employed bodies

Eligibility for self-employed individuals are

• Nationality: Residing Indian citizen
• Age: Generally around 25 to 70 years
• Employment: Business existence for 5 years or more

Note: Apart from the above eligibility criteria, borrowers are also required to keep a good credit score of 750 or more to secure a home loan transfer.

How to transfer your property loan balance?

Borrowers can follow the below-mentioned steps to apply for a loan against property balance transfer:

Step 1: Before deciding to transfer your property loan, borrowers need to ensure that they meet the above mentioned eligibility criteria.

Step 2: After checking the eligibility, borrowers should start looking for lenders. While shopping for lenders, they must compare the loan against property interest rate, tenure and quality of customer service. 

Step 3: After comparing the interest rates, you need to calculate the savings you can make by transferring your property loan. One can also refer to an online loan against property EMI calculator to determine if the EMIs are affordable.

Step 4: Before borrowing, they will have to collect a consenting letter and document stating the outstanding amount from the existing lender to submit to the new lender. After sorting the most favorable lender offering attractive interest rates and tenure, borrowers can start applying for property loan balance transfers.

Step 5: Thereafter the new lender would ask for property documents which would be submitted as collateral, and all the required documents as stated above.

Step 6: After the lender verifies the borrower’s documents and credit score, debtors can proceed to the payment window, where they will have to pay a processing charge for the balance transfer facility.

Step 7: After paying the processing fee, the lender will confirm the balance transfer, pay the outstanding amount to the existing lender and close the loan account. Subsequently, a new loan account will be opened with the new lender.

A property loan balance transfer can save individuals money on interest payments. It offers better loan deals with lower rates and favorable repayment terms. Comparing charges is essential for maximizing cost-benefit.