With banks and financial institutions competing with each other fiercely, you as a home owner can take advantage of the situation. In the past one year or so, the Reserve Bank of India (RBI) has decreased the key lending rates by several basis points.
Resultantly, the banks and financial institutions are left with excess liquidity which has further translated into cut in home loan interest rates from 9.4-9.5 percent to 8.3-8.4 percent. That means there is a clear-cut reduction of around 1 percent in the home loan interest rates.
Those who were paying for interest of Rs 950 per lakh should now be paying Rs 850. A saving of Rs 100 per lakh convert into big savings by the end of the year, as home loans range anywhere from Rs 5 lakh to Rs 5 crore or so.
Still, in order to get the lowest home loan interest rates, you might be required to transfer you home loan balance. The current loan provider may not be able to offer you the best rate.
“I had availed a home loan at the rate of 9.4 percent in July 2016 for a loan of Rs 40 lakh, however, currently it is pegged at 8.3 percent by banks such as the State Bank of India (SBI) and financial institutions like Bajaj Finance. My current bank offered me the reduced rate of interest at 8.4 percent but I got the offer from another bank at 8.30 percent. So, I decided to go for balance transfer,” said Shreya Pulkit Sinha, a resident of Exotica Fresco, Sector 137, Noida.
This could be your story too. But it is not that everyone is as lucky as Shreya. There are lot of people who do not get the balance transfer from the other institutions or when they apply for it, their application is not considered.
Let’s see what could be the reasons behind it. First off, banks always prefer customers who have good credit scores. If you have failed to pay your EMIs or have defaulted too frequently, then they will not be interested in transferring your loan to them. This is the very first condition for balance transfer of home loan.
Second very important factor is that one has to have paid the loan EMIs for a period of at least 12 months.
Third, all the banks have defined the minimum limit of home loan they can transfer. If the loan amount is below the threshold, they won’t accept the home loan balance transfer application.
Instead of home loan transfer, you can rather try to negotiate with your existing bank. There are chances that they provide you certain benefits. The balance transfer involves some cost and if you are getting a good deal from your current loan service provider, you should prefer to stay with them.
The documentation required for home loan balance transfer is no different. If you have decided to transfer it for any reason, you need to have the photo ID proof, address proof, income tax certificates, bank statements of 6 months and loan agreement.