home loan transfer - how to?
Why you should consider a home loan transfer
Lower interest rates offered by the other bank should not be the only reason for considering a home loan transfer. There are many other factors that you should assess carefully before taking a call.
Not getting benefit of falling interest rates
Despite the interest rates dropping substantially, banks sometimes fail to pass on the benefits of lower interest rates to existing borrowers. If you find yourself in such a situation, you can negotiate with your bank or consider transferring your loan to a different bank.
Better services
Are you fed up with your bank's poor services and bad customer care? You have the option of moving your loan to a new bank with better services.
Top up loan offers
You may need a top up loan for conducting repair work or managing other expenses associated with your property. If your existing bank is not offering you a top up loan, you are well within your rights to look for other banks offering you a better deal.
Lower interest rates
If your bank is charging you a higher interest rate for your loan, you can opt for loan transfer to a new bank that offers lower interest rates.
Things to know before opting for a loan transfer
While transferring your home loan may appear to be a smart way to save money, there are certain things to watch out.
Pre-payment penalty
If you are have a home loan with a fixed interest rate, your existing bank may charge you a pre-payment penalty fee for transferring your loan. Check with your bank about the pre-payment penalty charges and compare the financial advantages of a transfer before taking a call.
Processing fee and other charges
The new bank will charge you loan processing fees, legal charges, valuation fees, stamp duty, and other charges associated with the loan. Make sure you compare the benefits of reduced interest rates offered by the new bank after deduction of all loan processing charges and hidden charges.
Steps involved in a home loan transfer
Here is a step-by-step process when it comes to a home loan transfer.
Get NOC from your current bank
Once you are certain that you need to opt for a home loan transfer, you need to submit a letter of request with your current bank. As per your request, the bank will offer you its consent letter, known as a No Objection Certificate (NOC). The letter will have a statement mentioning your total outstanding amount. It may take 2-3 working days to get a NOC from your lending bank as the bank may try to offer you a better deal to stay back and reconsider your decision.
Apply with the new bank
Once you have the NOC, you can apply for a loan with your preferred bank with your income documents and copies of property documents. The new bank will evaluate your application and decide your loan eligibility.
Get your credit approval in writing
Once the new bank sanctions your home loan, it will give you its approval in writing, mentioning the interest rate offered and other terms and conditions of the loan. The new bank may take anywhere between 1-2 weeks before offering you a credit approval, as there are legal and technical verifications involved.
Request for document transfer and loan approval
In the last step, the new lender disburses the amount to your existing loan account, thereby closing your old home loan. Your old bank will hand over the property documents to the new bank and cancel any outstanding postdated cheques or ECS. The new bank may take another week or so for the documentation process and loan approval before your loan is officially transferred.
Opting for a home loan transfer can be a good way to save money especially if you feel you are paying a higher interest rate for your loan. But remember, there is no free lunch, and if you do not make your home loan repayment on time, no bank would consider your request for a loan transfer. more