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What Are the Processing Fees in Home Loan Balance Transfer?

Real estate

What Are the Processing Fees in Home Loan Balance Transfer?


Courtesy of accessible home loans, buying a house in any Indian city becomes a dream for most people. Several lending institutions across the country offer attractive housing finance options to all kinds of borrowers. In India, home loan interest rates vary for different lenders, and choosing the most affordable lender to finance your house always makes sense. However, if you have accidentally chosen an expensive or inconvenient housing loan, you can migrate to a different lender.

Changing lenders, mid-loan is what is called a home loan balance transfer. Most borrowers change their lender because they discover a new loan offer with a lower home loan interest rate or come across a new lender offering attractive features with the loan. Regardless of the reason, if one chooses to opt for a home loan balance transfer, one must know a few things about this process and its associated charges.

Balance Transfer

How Does Balance Transfer Work?

  • To begin with a home loan balance transfer, you approach your old lender and request a transfer. After assessing your eligibility, the lender procures a set of documents with which you can contact your new lender. These documents include NOC, property papers, and loan statements.
  • After comparing the home loan interest rate payable to different lenders using a home loan calculator, you can decide which new lender fits you. These home loan calculators are available on most lender websites.
  • While applying for the new loan, you must furnish the same documents for the original loan. These include identity-related documents, sales, purchase deeds, previous home loan statements, documents, proof of income, etc. Check the documents required for a new home loan online on your chosen lender’s website.
  • Once the new lending institution approves your request for a balance transfer, they will pay the remaining principal balance to your old lender and request the cancellation of post-dated cheques. The balance transfer is then complete.

Charges of a Home Loan Balance Transfer

  • The processing fee is one of the most significant charges for a home loan balance transfer. This fee is usually charged by your new lender, just like your old lender did when you applied for the home loan. It can be between 0.5% to 1% of the total loan amount. If it presents a significant financial burden to you and compromises the benefits you saw in the loan in the first place, you should consider staying with your old lender.
  • Other charges associated with a home loan balance transfer include penalty payments, transfer fees, or other payments demanded by a particular lender.

Every lending institution has different rules, processes, and charges regarding home loan balance transfers.

Before choosing a new home loan lender, use their home loan EMI calculator to check the remaining home loan interest, the actual home loan interest rate, how much it translates to, and the new home loan interest rate applicable after the transfer.

Also, don’t forget to check your home loan eligibility with the new lender. If you feel that opting for a new lender is beneficial after comparing the savings with the balance transfer charges, don’t hesitate to apply for it.

Eula Boone

I have written professionally since 2010 and have been an investor since 2015. My finance blog, economydiva.com, is one of the most visited blogs in the world, with more than 3 million readers a month. I love sharing what I know about investing, saving, and managing money and providing practical tips on how to be a smart and savvy money manager.