Investment Yogi | Hyderabad September 13, 2013 Last Updated at 08:46 IST | Business Standard
On the basis of good repayment track record, individuals can also discuss and re – negotiate with their current lender for better interest rates
If you are not happy with your existing Home Loan, then there is a ray of hope for you. Now you can transfer your loan to another bank. Loan Transfer or Refinancing of loan is an easy option through which most of the people nowadays are opting to take the benefit of lower interest rates prevailing in the market.
Existing Loan borrowers are the class of people who are repaying a loan for the past two or three years and upon whom banks do not get pass on the advantage of decreasing loan rates. However, on the basis of good repayment track record, individuals can also discuss and re – negotiate with their current lender for better interest rates.
Reasons for transferring Home loan apart from savings on interest
Not just the reduction in interest rates, there are several more reasons due to which one would want to change his current lender. Few of the reasons are stated below:
In case, you need to renegotiate on some terms and conditions with existing bank. For Example: you want to increase the tenure of your loan and decrease the amount of your EMI but your bank has not agreed to that.
Loan Top – up: May be the value of property has climbed much higher in comparison to its original value. Based on this, you might want to top – up your loan to meet further requirements like renovation of home. But the lender might not be open to these.
Sometimes, you are just not happy with the services & accessibilities of the bank and wish to transfer the loan.
Process of Home Loan transfer
The process of transferring of home loan is very simple and it is completed in a few steps. Firstly, you need to submit an application to your current lender requesting to transfer your current home loan to the other bank. On the basis of your request, the bank will provide you a consent letter or NOC and also statement mentioning your all outstanding amount. Then you need to submit these documents to the bank where you want to transfer the loan.
Afterwards, your new lender sanctions the loan amount to the old lender for the closure of your account. Once all the transactions are over, your property papers will be handed over to the new lender and remaining postdated cheques or ECS will be cancelled. The home loan switch is beneficial because the bank in which such loan is transferred offers you a lower rate of interest.
The Bank you are moving on will treat your home loan as fresh and you have to follow all the procedures again. It will include your credit appraisals, legal verification of your property credentials and also the technical evaluation by the new bank, etc.
On transferring to your account, you need to pay some processing fees to your new lender which ranges somewhere between 0.5% and 1.5% of the loan amount.
Things to consider before transferring your Loan
Banks and other financial companies are struggling hard to expand their business by offering lower rates of interest to new customers. Now, as a borrower, it is your duty to check all the facts thoroughly before transferring your loan.
Here are few points you must take into account.
• One should always check the timing of loan switch to new bank: Always try to switch the loan in the early tenure of loan. It is not advisable to transfer your loan after 2 – 3 years of loan payment. As you have already repaid most of the interest amount and in the process of transfer, you will shell out more amount as fees.
• Always study processing fees & other charges: One should always consider the processing fees, legal charges, valuation fees, stamp duty and other charges which a new bank is going to charge. Then accordingly compare it with the benefit of reduced interest rate.
• Check the Teaser loan Terms and Conditions: Of late, the home loan transfer has been most essential when the teaser loan scheme hits the market. One should always keep in mind that the teaser rate is for a limited time frame and will adjust after that time.
• Take Documents in Time: Always take statements from current lender that documents of property will transfer to a new lender within a stipulated time frame. It will lead to hassle free transfer of the loan.
Do remember that loan transfer is only possible when you are regular in loan repayments to your current bank. At last, one should not always be attracted to interest rate which is lower than existing ones. After all, banks are dealing with lending and why would they give loan at lower rates when they are earning higher margin from other customers. So, it is good to be doubtful and always ask questions regarding all aspects before switching from an existing lender.