If you are not satisfied with your existing Home Loan lender, then there is a ray of hope for you. Now you can transfer your loan to another bank. A Balance transfer is a best and easy option because of which most of the people nowadays are choosing to take the benefit of lower interest rates prevailing in the market. The rate of interest on an existing home loan and the flexibility the lending institution offers determines whether one wants to continue with the same lender or thinks of a switch. For a lower interest rate and for other advantages, home loan borrowers can transfer the outstanding balance to another bank. The new bank pays the old lender the outstanding principal due on the loan.
The Home Loan Balance transfer not only mean saving money, it also means one can make use of the same for various other options. After-all having a home loan and buying a house is not the end of the journey. A balance transfer may give the borrower better offers and services. A balance transfer will definitely reduce the monthly payment there is no doubt in it, but finding the best one that suits your requirements is essential.
Reasons for Home loan Balance Transfer apart from savings on interest:
- Not just the reduction in interest rates, there are a lot of other reasons due to which borrower wants to change his or her current lender. Some of the reasons are stated below:
- In case, you want to renegotiate on some terms and conditions with the existing lender. For Example, you want to increase the tenure of your loan and decrease the amount of your EMI but, your current lender has not agreed to that.
- Loan Top up: Maybe the value of a property has risen much higher in comparison to its original value. Because of this, you might want to top up your loan to meet further requirements like renovation of a home. But your lender might not be open to these.
- Sometimes, you are just not happy with the accessibilities & services of the bank and want to transfer the loan.
The process of Home Loan transfer:
Here is a 5 step guide to transfer your home loan to lower interest rate:
1. Analyze the Cost Benefits:
Study your situation, after which you will be able to decide the viability of your home loan balance transfer. Here are a few broad guidelines that will help you:
- If your home loan is set on a fixed interest rate, then you may need to pay a prepayment charges to transfer your loan and therefore it is not advisable to transfer your home loan In this situation.
- But if your loan is based on a high floating interest rate, then it is beneficial to transfer your loan to a lower interest rate. Most leading banks are now offering interest as low as 8.3% per year.
- If your home loan is on long repayment tenure, then transferring can bring higher cost benefits.
- You must keep an eye on hidden costs involved in the loan transfer process. For example, few banks don’t add documentation charges in the processing fee and also when a new mortgage deal is prepared, a Stamp Duty has to be paid, which is not included in the processing fee.
2. Get NOC from your Current Bank:
The next step is to obtain a NOC (no objection certificate), from your current bank along with:
- Your payment history
- Foreclosure letter
- A list of your documents that the bank has
This process may take a few weeks or less, varying from bank to bank. At this stage, your existing bank may try to retain you from transferring the home loan balance by offering a reduction in the interest rate. Sometimes, it is best to take this offer and bargain with another bank and decide on the best deal.
3. Apply To New Bank:
After getting all the documents, it’s time to apply for home loan transfer with a new bank of your choice.
- For this, you will also need a NOC from your housing society /the respective real estate developer.
- Submit the proof of ownership of the house and your proof of income to the bank.
- Then, the bank will check your ability to pay the EMI. While making the application, sometimes you can opt to top up the balance on your home loan in order to reduce the EMIs or tenure.
4. Bank Checks your Credit Worthiness and Eligibility:
- The lender will now evaluate your loan application and decide your eligibility status. There is a chance that the bank may require further details in this process.
- This process is time-consuming, as different banks have set different procedures. This process may take 3-4 weeks, varying from case to case.
- The bank will carry out an extensive background check on you before they give you a credit approval. It will include:
Check your credit history
Re-evaluate your home loan
Verify the authenticity of ownership
May also ask for extra documents from you, in case a need arises
- After the Credit Approval, the bank will give you a letter informing about the interest rate on which the home loan balance transfer will be sanctioned along with terms and conditions. Once you get a credit approval from your new lender, it’s time to make the final decision to switch.
- You are provided with two options:
Switching your home loan within the same bank to a lower interest rate
Switching your home loan from your existing bank to the new bank
5. Submit Documents at the Chosen Bank:
- In the final stage, you need to carry out the documentation procedure with the chosen bank. This is done at both ends- your old and new bank will have a specific requirement of a set of documents to complete the switching process.
- In case of transfer to the new bank, the old bank will release your documents only if they get the cheque for the balance principal amount and the new bank will release the cheque only after all the documents are submitted to them.
- To solve this situation, a meeting is held between representatives of the two banks. This ends the Balance transfer process of your home loan. You can save up to 30% of outstanding principal.
Banks and other lending institutes are struggling hard to expand their business by offering lower interest rates to new customers. Now, as an applicant, it is your duty to verify all the facts thoroughly before transferring your loan. Do remember that loan transfer is only possible when you are regular in loan repayments to your present bank. At last, one should not always be attracted to lower interest rates. After all, financial institutes are dealing with lending and why would they give loan at lower rates when they are getting high amount from other customers. So, sometimes it is good to be doubtful and ask questions regarding all aspects before switching from an existing lender.