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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 come true 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 it always makes sense to choose the most affordable lender to finance your house. However, if you have accidentally chosen an expensive or inconvenient housing loan, you have the option of migrating 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, they must know a few things about this process and the charges associated with it.

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 for the same, 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 by using a home loan calculator, you can decide which new lender is the fittest for you. These home loan calculators are available on most lender websites.
  • While applying for the new loan, you will have to furnish the same documents for the original loan. These include identity-related documents, sales, purchase deeds, previous home loan statements and 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

  • One of the most significant charges attached with a home loan balance transfer is the processing fee. 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 anywhere 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 transfer.

Before choosing a new home loan lender, use their home loan EMI calculator to check the amount of home loan interest remaining, 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 charges of a balance transfer, 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.