A home loan balance transfer can be a smart financial move—especially when you find a lender offering lower interest rates or better terms. But while the promise of saving money is tempting, there’s a catch: hidden charges. If you're considering a balance transfer, it’s crucial to look beyond the headline interest rate. There are several hidden or less-talked-about costs that can eat into your potential savings. This blog will walk you through the common hidden charges in home loan balance transfers so you can make an informed decision.

What Is a Home Loan Balance Transfer?

A home loan balance transfer allows you to shift your existing home loan from your current lender to another bank or financial institution that offers better interest rates or loan terms. It sounds great on paper—and often it is—but only if you understand the total cost of transferring.

Hidden Charges to Watch Out For

Most new lenders charge a processing fee on the transferred loan amount. This can range from 0.25% to 1% of the outstanding loan amount, or a fixed fee. Lenders often conduct legal and technical verification of the property before approving the transfer. These services can come with hidden legal, admin, or documentation charges, typically between ₹3,000–₹10,000. While floating-rate home loans don’t attract prepayment penalties (as per RBI norms), some fixed-rate loans or NBFCs may charge foreclosure fees ranging from 2% to 4%.

Prepayment or Foreclosure Charges (by Existing Lender)

While floating-rate home loans don’t attract prepayment penalties (as per RBI norms), some fixed-rate loans or NBFCs may charge foreclosure fees ranging from 2% to 4%. In some states, a stamp duty is applicable on loan agreements or mortgage documents—even during a balance transfer. This fee varies by location and can add an unexpected cost. This is a document signed with the new lender to confirm that property documents have been handed over as security. Banks may charge a fee for MOD registration, ranging from ₹1,000 to ₹7,000 depending on the state.

Final Thoughts

A home loan balance transfer can help you save significantly in the long run—but only if you're fully aware of the hidden charges involved. Always do a cost-benefit analysis before making the switch. Remember, the best financial decisions are not just about the interest rate—they’re about the total cost of borrowing.