People repaying a home loan must understand the importance of home loan transfers. A home loan transfer is a highly beneficial facility offered by most lenders these days. Using this facility, people currently repaying a home loan can transfer the remaining balance on their home loan account to another lender willing to refinance the same loan at more favourable loan terms and conditions. 

In most cases, people go for a home loan transfer when they find another lender willing to refinance the loan at a lower home loan interest rate as a lower interest rate helps make home loan EMIs affordable, gives loan borrowers increased dispensable income and also successfully reduce the total cost of borrowing money.

In some cases, however, housing finance borrowers also change lenders or switch home loan partners to benefit from better service or simply avail of a home loan top-up. Borrowers can avail of a home loan top-up amount as high as Rs.1 Crore under this facility, provided they meet the eligibility for home loan transfer and have an income that allows them to support the increased EMI burden. 

It must be highlighted here that home transfers attract a home loan transfer fee as well as various other charges. Therefore, the decision to go for a home loan balance transfer must be taken after taking into consideration all the different home loan transfer charges. Here we talk about these home loan transfer charges in detail.

Home Loan Transfer Charges: A Detailed Analysis

Processing Fee

Your lender will charge a percentage of the total loan amount as the home loan balance transfer processing fee.  You may think that you are simply switching lenders, however, your new lender will treat your home loan balance transfer application as a new loan application and therefore, aa processing fee automatically becomes applicable.  The processing fee can reach range from 0.25% to 2% of the total loan amount.

Legal Fees

The decision to switch lenders is an important one. If opted for after careful planning, a home loan balance transfer can make the loan applicants’ life a lot easier. 

However, if availed of without thinking things through, the same facility can increase the borrower’s overall financial burden and become a liability, 

Therefore, home loan transfer applicants are often advised to hire a legal expert who can help them clearly see both the pros and cons of switching their lender. Some lenders charge a legal fee to hire a legal expert and look into whether a home loan balance transfer would indeed be the right choice for you. 

Statutory Charges  

Your home loan balance transfer will attract certain taxes and duties and these statutory charges must be paid by the loan applicant. 

Prepayment and Foreclosure charges

If you opt for a home loan balance transfer, you will need to first close your loan account with your current lender.   If you are on floating interest rates you can close your loan account with our current lender at any time without paying any foreclosure penalty. However, people on fixed interest rates are often asked to pay a foreclosure penalty, which can go up to 4% of the total loan amount. 

If you are on fixed interest rates, know that the fixed interest rate foreclosure charges, processing fees, and other charges can turn out to be a humongous amount. Therefore, borrowers who have availed of loans on fixed interest rates must choose to go for a balanced transfer only after carefully weighing all the costs involved and doing a thorough cost-benefit analysis.

Final Words 

In conclusion, home loan balance transfers involve more than one fee and this fee can add up to a considerably high amount, one that can easily outweigh the savings made through the transfer. 

Therefore, anyone applying for a home loan balance transfer must always use the home loan balance transfer calculator to calculate their total savings and they should go ahead with the transfer only if the total savings facilitated by the home loan balance transfer are much higher than the total fees and costs involved. 

Borrowers must also know that when they apply for a home loan balance transfer, they are given the option of a top-up loan. While a top-up loan offers many benefits, it also increases one’s EMI burden and therefore, one must avail themselves of a home loan top-up only when one can comfortably afford the new EMIs.