Tips: Home Loan Transfer
A home loan plays an important role in making your dream of owning a home come true. Home Loan amount varies from person to person depending on the repayment capacity, age and income, dependents and so on. The loan is available to those who are eligible for a contract such as any person who is not less than 18 years, must not be insane and insolvent or bankrupt. Loans are offered to salaried individuals, professionals or businessmen or self-employed individuals and NRI’s. However, there are various reasons wherein a home loan borrower would like to transfer his home loan to another bank. There are number of banks which offer home loans for lower interest rates. It is always important to keep all the basic documents in hand which can save time and effort. One of the main reasons wherein an individual opts for a loan transfer is due to the higher interest rates.
A home loan transfer is also known as a refinancing or balance transfer. This is an option wherein most of the individuals opt to avail the benefits from lower interest rates prevalent in the market. In most cases a person who has taken a home loan for more than two years might like to shift his home loan to avail the lower interest rates, only the new home loan seekers were enjoying the lower interest rates. Apparently the RBI has been insisting all the banks to lower the interest rates of both the old and the new home loan seekers. Individuals looking for a lower interest rate benefit can re-negotiate with their bank for the interest rates as far as they have a good repayment record. Perhaps if the bank is not willing to offer the lower interest rate services, the person can shift to another bank offering lower interest rate as per the market.
The procedure to shift a home loan:
- If you have decided to shift your home loan to another bank you should send a letter to the existing bank in which you have your account. The letter should contain a request for a loan transfer.
- Once the bank receives the request letter, the bank will give you a consent letter/NOC and a statement mentioning the outstanding amount.
- All of this information should be provided to the new lender who sanctions your loan amount to the old lender for an account closure.
- Once the transaction is complete, your property documents will be given to the new lender along with the remaining post-dated cheques/ECS cancelled.
- Henceforth the bank you will be shifting to will offer you a loan based on the current home loan rates they are offering to their home loan applicants.
- Please note that a prepayment penalty will be levied by your existing lender which can vary anywhere between 2%-5% of the principal outstanding of the loan at the time of refinance.
Also you should keep in mind that you will have to pay a processing fee to the new lender of about 0.5%-1% of the loan applied. Apparently, most of the banks restrict this amount to Rs. 5,000. The timing of your loan switch also plays an important role as sifting your loan after most of your interest has been paid will not make much money and will also result in extra spending.
Transfer a loan only if you think you can benefit quite a sum of interest rate. Also in the recent days the SBI has hiked its base rates of about 0.25%. This in turn has resulted in more hikes from other banks very soon.
The documents required for the new lender:
- Photo Identity Proof,
- Passport Size Photographs,
- Copy of your PAN Card,
- Address Proof,
- Proof of your Age,
- Last 6 months bank statements,
- Copy of the Property Title Deed,
- Form 16 for the last 3 years (for salaried persons),
- Last 6 months salary slips (for salaried persons),
- Copy of IT Returns of last 3 years (for businesspeople / self-employed people),
- Copy of audited Balance Sheet & P&L statements of last 3 years (for businesspeople / self-employed people)
Henceforth the home loan being the biggest liability, you can ask your lender to reduce the interest rates and in case if the lender is refusing to lower the interest rate,s you can opt for a balance transfer and save your hard earned money and prepay your loan as soon as possible.
