A few years ago, the Reserve Bank of India passed a new regulation, which made the life of all loan borrowers much easier. The central bank of the country allowed loan borrowers on floating interest rates to prepay or foreclose their loans without paying any penalty.
However, this facility is extended only to individuals on floating interest rates. People on fixed interest rates must still pay prepayment and foreclosure fees. The introduction of this facility by the Reserve Bank of India eventually led to the introduction of the home loan balance transfer facility.
A home balance transfer is an important facility using which loan borrowers can transfer the remaining balance on their home loans to another lender if another lender is willing to refinance the loan at more beneficial loan terms and conditions. In most cases, lenders generally ask to be switched to a lower latest home loan interest rates.
However, in some cases, lenders choose to switch lenders to benefit from the other facilities extended to home loan balance transfer users. For instance, many people choose to switch lenders to avail of a home loan top-up. Others take the option to be able to switch their interest rate type or enjoy better customer service and support.
If you are planning to avail yourself of a home loan balance transfer, know that this facility requires borrowers to pay various charges and consequently, the decision to opt for a home loan balance transfer must be taken only after a loan borrower has carefully taken into consideration all the home loan transfer charges. The use of a home loan balance transfer calculator is also recommended. Let us now walk the readers of this article through the various home loan transfer charges.
Home Loan Transfer Charges: Everything You Need to Know
Processing Fee or the Home Loan Transfer Charges: When you opt for the home loan balance transfer facility, you assume that you are simply switching lenders and therefore, home loan transfer charges must not apply. However, your new lender will treat your home loan balance transfer application as a new application and therefore, a home loan balance transfer processing fee becomes automatically applicable. This fee is charged as a percentage of the total loan amount and generally ranges from 0.25% to 2% of the loan amount.
Legal Fee: The decision to avail of a home loan balance transfer must be taken after weighing all the pros and cons. As an example, when you switch lenders after you have already repaid a significant portion of your loan, a home loan balance transfer won’t help you save significant money.
In fact, in this case, the home loan transfer charges can turn out to be significantly higher than the savings facilitated by the transfer. Therefore, borrowers are generally asked to hire an expert and opt for a balance transfer only after receiving a nod from them. The legal fee is the fee that goes to these experts.
Late EMI Payment Charges: If you miss paying a home loan EMI after opting for a home loan balance transfer, your lender will apply late EMI payment charges. The late EMI payment charges generally range from 1% to 2% of the pending EMI. In case a loan borrower does not pay their loan EMIs on time for an extended period, the lender has to send notices and sometimes, even hire help to recover the amount due. Lenders recover these charges from the loan borrowers in the form of incidental charges.
Statutory Charges: These are the charges that are to be paid by the loan borrower to the various state agencies. Your lender will collect this charge from you in the form of statutory charges and pay the central and state governments on your behalf.
Final Words
If you are planning to apply for a home loan balance transfer, read about the various charges and then use a home loan balance transfer calculator to ascertain if opting for a transfer would indeed allow you to save money in the long run. If the opportunity looks promising, research lenders, compare offers made by them and make sure you qualify for a home loan transfer.
