It is not always possible to stay happy with the lending bank of your home loan. In many cases, people apply for loan and take it straight away without thinking of advantages and disadvantages because they are in a hurry to purchase the house of their dreams. Even if you are satisfied with the advantages and rates offered by your current lending bank, some new offers with additional advantages and lower interest rates may make you consider the option of transferring the loan. In most of the cases banking relationship for home loan is long term, 15 or more years, and thus it is important to make the most of the offers available. Home loan balance transfer is not a new concept but it has become simpler than before in last few years.
Things to know for home loan balance transfer
In case of home loan transfer, the remaining balance for the home loan will be transferred to the new bank but it is on the discretion of the lending bank to determine if penalty for the same would be levied or not. Your home loan agreement has conditions like these mentioned on it. It is possible to get the loan transferred and pay a lower interest rate for the loan amount through the new bank. The interest rate will however remain on the sole discretion of the bank. The home loan transfer may also help you to increase your loan tenure which will again lower your monthly burden. While applying for home loan transfer, you may also take some additional amount as loan for the purpose of home renovation
How to transfer home loan?
- If you are not happy with the current lending bank and you are not able to negotiate, just drop an application to the current lender requesting to allow the transfer. After you submit this application, the bank needs to provide a NOC or no objection letter which will bear your outstanding amount too.
- Once you receive the consent letter from the bank, the next step would be to submit the letter to the new lender. This will serve as a clearance certificate to the bank to offer you loan and they will also get to know the amount required for the loan.
- The lender then sanctions the amount to the old lender and not the owner of the loan. Once the loan is disbursed to the old bank, the property papers will be transferred to the new bank and those will be kept in the safe deposit of the new bank, just as before.
- For the new bank, it will be a new loan and thus it will do all the verification and credit checks before offering the loan. They will have to do all checks required for any fresh loan and offer you the amount based on the price of the property and your eligibility. You will also need to pay some processing fee to the new lender which can range from 0.5 to 1.5 percent. Your loan will start afresh from the new bank. Since it is a new loan, you are free to negotiate for the interest rates and other offers related to the loan.
It is always advised to shift the loan within two to three years of taking the loan. In most of the cases, you have paid the major part of interest in the first two or three years and then you will be paying the principal which will be same even if you transfer. Processing fee and transfer fee may be a major decisive part. You need to check these fees and also calculate the overall cost before taking any decision. Make sure to collect all the documents from the old bank and keep things updated. Make sure to pay your loan EMIs regularly or else you may not be offered the home loan balance transfer option.