Things to Consider while doing Home Loan Transfer to Another Lender

avail a home loan

avail a home loan

In the first two months of 2021, the incremental spread of housing finance companies reduced to 125 bps, the Nomura report revealed. It directly benefits the home loan borrowers, both existing and new ones, as they can now opt for this secured credit at cheaper rates. 

Besides, the unchanged repo rate at 4% resulted in benign interest rates among lenders. In such a scenario, the existing borrowers get a chance to opt for a

In the first two months of 2021, the incremental spread of housing finance companies reduced to 125 bps, the Nomura report revealed. It directly benefits the home loan borrowers, both existing and new ones, as they can now opt for this secured credit at cheaper rates. 

Besides, the unchanged repo rate at 4% resulted in benign interest rates among lenders. In such a scenario, the existing borrowers get a chance to opt for a home loan balance transfer and reduce the interest burden. 

However, before doing so, they should consider a few factors that help leverage the optimum benefits of such balance transfer. 

Points to consider while opting for a home loan transfer 

Although the existing borrowers consider transferring the outstanding home loan balance to another lender due to lower interest rates and better terms. However, this option also entails several other benefits. To make most of such facilities, borrowers need to keep a few pointers in mind while undertaking this transfer. 

  • Right time to switch lender

As per financial experts, individuals should opt for a home loan transfer if the existing tenor is more than 10 years. In the initial phase of repayment, a considerable part of an EMI contains the interest part. 

Therefore, a loan balance transfer would be feasible only if the home loan tenor left is more than 15 years and the new interest rate is at least 25 bps cheaper than the current one. However, if the tenor left is between 10 and 15 years, they should estimate the maximum savings they can ensure from a loan transfer. 

  • Total cost involved

Borrowers should also consider the penalty and other additional charges that one may incur during a home loan transfer. Some lenders also charge foreclosure charges while borrowers decide to transfer their outstanding home loan balance. 

Hence, they should consider the charges before applying for this option. Additionally, individuals also need to pay processing fees to a new lender while opting for a home loan transfer. It usually ranges up to 1% of the outstanding loan amount. 

In this regard, they can also use a home loan balance transfer calculator to determine if the loan balance transfer is worth it or not.  

  • Eligibility for loan transfer

Usually, a lender offers you better interest rates and approves a home loan transfer application if you have a spotless repayment history and a good credit score. Therefore, if your credit score dips between when you opted for the first loan and now, your eligibility would suffer a significant blow. 

However, in such cases, you can also opt for a home loan refinance facility and negotiate with your current lenders to revise the loan terms.  

  • Interest rate regime 

Home loan interest rates can be of two types – fixed and floating. The fixed interest rates are higher than the floating interest rates. However, the market condition is bearish; you can consider converting the floating interest rates to a fixed regime.

Besides, if you avail a home loan that follows MCLR, you can switch to interest rates linked with an external benchmark for better terms. However, the housing finance companies have their own protocol to decide the interest rates, primarily based on the competition in the market.  

  • Top-up loan size 

Lenders offer top-up loans on the outstanding home loan while borrowers transfer it to them. However, unlike a housing loan, a top-up loan does not entail any restrictions on end-use. It allows borrowers to utilize the funds for any financial requirements not limited to the home. 

However, the top-up loan amount depends on the outstanding loan amount and the borrower’s credit profile. 

  • The credibility of the new lender

Although you opt for a home loan transfer for better interest rates, if a lender charges a significantly lower rate, you should check the credibility of that financial institution. Ensure that you also conduct background checks of that lender. 

Selected HFCs allow existing home loan borrowers to transfer their due loan balance to them for better interest rates and terms. They also provide pre-approved offers to existing customers that expedite and simplify the loan processing. Check your pre-approved offer by providing some basic credentials. 

These are some of the most crucial factors individuals need to know while opting for a home loan transfer with another lender. Besides, they should also consider the transfer time from one lender to another. It usually takes 2 weeks to 3 weeks, depending on the lender. 


and reduce the interest burden. 

However, before doing so, they should consider a few factors that help leverage the optimum benefits of such balance transfer. 

Points to consider while opting for a home loan transfer 

Although the existing borrowers consider transferring the outstanding home loan balance to another lender due to lower interest rates and better terms. However, this option also entails several other benefits. To make most of such facilities, borrowers need to keep a few pointers in mind while undertaking this transfer. 

  • The right time to switch lender

As per financial experts, individuals should opt for a home loan transfer if the existing tenor is more than 10 years. In the initial phase of repayment, a considerable part of an EMI contains an interesting part. 

Therefore, a loan balance transfer would be feasible only if the home loan tenor left is more than 15 years and the new interest rate is at least 25 bps cheaper than the current one. However, if the tenor left is between 10 and 15 years, they should estimate the maximum savings they can ensure from a loan transfer. 

  • Total cost involved

Borrowers should also consider the penalty and other additional charges that one may incur during a home loan transfer. Some lenders also charge foreclosure charges while borrowers decide to transfer their outstanding home loan balance. 

Hence, they should consider the charges before applying for this option. Additionally, individuals also need to pay processing fees to a new lender while opting for a home loan transfer. It usually ranges up to 1% of the outstanding loan amount. 

In this regard, they can also use a home loan balance transfer calculator to determine if the loan balance transfer is worth it or not.  

  • Eligibility for loan transfer

Usually, a lender offers you better interest rates and approves a home loan transfer application if you have a spotless repayment history and a good credit score. Therefore, if your credit score dips between when you opted for the first loan and now, your eligibility would suffer a significant blow. 

However, in such cases, you can also opt for a home loan refinance facility and negotiate with your current lenders to revise the loan terms.  

  • Interest rate regime 

Home loan interest rates can be of two types – fixed and floating. The fixed interest rates are higher than the floating interest rates. However, the market condition is bearish; you can consider converting the floating interest rates to a fixed regime.

Besides, if you avail a home loan that follows MCLR, you can switch to interest rates linked with an external benchmark for better terms. However, the housing finance companies have their own protocol to decide the interest rates, primarily based on the competition in the market.  

  • Top-up loan size 

Lenders offer top-up loans on the outstanding home loan while borrowers transfer it to them. However, unlike a housing loan, a top-up loan does not entail any restrictions on end-use. It allows borrowers to utilize the funds for any financial requirements not limited to the home. 

However, the top-up loan amount depends on the outstanding loan amount and the borrower’s credit profile. 

  • The credibility of the new lender

Although you opt for a home loan transfer for better interest rates, if a lender charges a significantly lower rate, you should check the credibility of that financial institution. Ensure that you also conduct background checks of that lender. 

Selected HFCs allow existing home loan borrowers to transfer their due loan balance to them for better interest rates and terms. They also provide pre-approved offers to existing customers that expedite and simplify the loan processing. Check your pre-approved offer by providing some basic credentials. 

These are some of the most crucial factors individuals need to know while opting for a home loan transfer with another lender. Besides, they should also consider the transfer time from one lender to another. It usually takes 2 weeks to 3 weeks, depending on the lender.