Home Loan Transfer Charges: What You Need to Know

A home loan balance transfer is an option or facility that existing home loan borrowers can use to transfer the balance on their current home loan account from their existing or current home loan lender to another one in return for a lower interest rate, a higher loan sanction, a home loan top up, longer repayment period, better loan service, etc.

Borrowers opting for a home loan transfer to benefit from the latest home loan interest rates must choose to do so during the early years of their loan repayment when a significant part of the total interest is yet to be repaid. Further, borrowers must also keep the home loan transfer charges in mind. Other than the loan processing fee, financial institutions also apply several other additional charges that directly or indirectly increase the cost of borrowing funds, consequently negatively impacting the total savings facilitated through the loan. Here, we look at the various home loan transfer charges that banks and financial institutions apply on home loan balance transfers. 

Home Loan Transfer Charges You Must Know About 

1. Processing Fee: All financial institutions treat home loan balance transfer applications as new loan applications. These institutions, therefore, apply a home loan processing fee, which is the money they charge to take care of various expenses related to verifying and understanding the suitability of a loan applicant’s candidature for a home loan transfer. The home loan processing fee can go up to 6% of the loan amount and be a hefty amount. The home loan processing fee is negotiable and with the right credit profile, loan applicants can easily negotiate for a lower home loan processing fee. 

2. Legal Fee or Expert Fee: A home loan balance transfer is not the most ideal option for everyone. Therefore, individuals are often asked to get a second opinion from a legal expert on whether a home loan balance transfer would indeed prove helpful for them. Financial institutions charge money for offering this advice in the form of a legal fee or expert fee. 

3. Incidental Charges: These charges become applicable when a loan borrower misses a loan EMI payment and the financial institution then has to spend money on ensuring timely recovery of loan funds. 

4. Statutory Charges: These charges go towards the maintenance of the loan applicant’s application and account and must be paid by the loan applicant. 

If the idea of a home loan balance transfer seems appealing to you and you have another lender willing to refinance your loan on better loan terms and conditions, you must most certainly read about eligibility for home loan transfers. Apply for a balance transfer only if you meet all the qualifying criteria. Further, make sure to use the home loan balance transfer calculator, a free online tool that allows you to accurately calculate the total interest you will save by switching to a lower or latest home loan interest rate. Some of these calculators are elaborate and give loan applicants a clear idea of the total money that will go in fees towards the transfer, thereby giving the applicant a very clear picture and allowing them to correctly assess the overall feasibility and profitability of the balance transfer.

Further, if you are applying for a home loan balance transfer, here are a few things that you must keep in mind: 

1. Before choosing to go with a specific lender, do your research. Speak to at least a few different lenders and see what each is offering. Use a home loan balance transfer calculator to compare offers and choose the best one for you. 

2. Very often, home loan balance transfer applicants make the mistake of not reading the fine print. If you are opting for a home loan transfer, make sure to read the new agreement carefully. Hire an expert to help you understand every term and condition. Sign the agreement only when you understand and agree with everything.

3. When lenders opt for a home loan balance transfer, they are given the option of changing their interest rate type and the loan tenor. If you want to change your interest rate regime or the loan tenor, do so while switching lenders. 

4. Lastly, along with a home loan balance transfer comes the option to avail of a home loan top up. If you need additional funds at low interest rates, you can consider availing yourself of a home loan top-up.