Today, everyone dreams of owning a home. For some, it is a need, for others it might be luxury or just an investment. Government also gives tax benefits for those who apply for home loan. Taking a loan for a house usually means lending a huge amount for a long tenure. The interest rates for home loans changes every financial year. There are chances that the interest rates might drop after you take a home loan.
However, you don’t need to worry about paying more as you can transfer your home loan from your current bank to another and enjoy lower interest rates. This is called Home Loan Transfer or Refinancing or Takeover of Loan. In other words, it is a process in which you can shift your existing loan amount (or outstanding amount) to another bank offering lower interest rates.
Why Transfer Your Home Loan From Your Current Bank?
There are various reasons why people go for home loan transfer:
Due to difference in the interest rates between two banks, transferring your home loan to a bank offering lower interest rates can reduce the amount of your monthly EMI.
Other banks would love you to become their customers. Because of this, they will offer you attractive discounts and benefits.
Poor Service by Existing Bank
If you are not satisfied with the service of your existing bank, you can go ahead and transfer the loan.
If the rates of the house have gone up in the past few years, banks might offer you incremental funding or Loan Top-up, which you can use for home improvements.
To avail home loan transfer, an individual must complete the following criteria:
- He/She should be of Indian nationality.
- He/She should be between 21-60 years.
- He/She must be employed for atleast 2 years in your current organization. The time period might vary from bank to bank.
- He/She should have some monthly repaying capacity.
- He/She must have paid all the previous EMIs and bills on time.
Carry the original and photocopies of the following documents:
- Self-attested passport photographs
- Loan transfer application filled with all the details
- Last 3 months salary slips, with proper break up
- Last 6 months bank statement from where the last loan EMIs were deducted
- Identity Proof (PAN, Aadhaar, Voter ID Card)
- Address Proof
- Age Proof (10th certificate, PAN, Aadhaar Card)
- Loan statement copy
- Complete property documents, which will be given from existing lender
Following are the steps involved in the home loan transfer:
- Search and research for the banks offering lower interest rates for home loan transfer.
- Once decided, submit an application to your current bank requesting for loan transfer.
- On the basis of the request, you bank will issue a NOC with the outstanding amount.
- Submit that NOC along with the documents (mentioned in the previous section) to the bank where you transfer the loan.
- Your new bank will close your current loan amount to the previous bank.
- Once the transactions are over, the previous bank will handle the property papers to the new bank and cancel the post-dated cheques.
- On transferring your account, you need to pay some processing fees which can range from 0.5% to 1.5%.
Looking for another bank that offers lower rate of interest on your current home loan is a daunting task. However, online aggregators make it easier with their Home Loan Balance Transfer Calculator. With this tool, you can compare the rate of interest offered by different bank, based on your needs. Also, they offer you a fine print of transfer agreement to help make you better decision.
Although, home loan transfer look like an easy task, there are few things that you should keep in mind. Firstly, avoid going for loan transfer after 6-7 years of loan payment as you might have paid majority of amount initially. Your new bank will treat your application as fresh and you will have to go through legal verification once again. Also, there might be some issue in case of irregular loan repayment. Therefore, make sure that you keep all aspects of home loan transfer in mind.