subject: Home Loan Balance Transfer - Good Option When Rates Change [print this page] Most existing borrowers face the problem of paying relatively higher interest rates on their existing loans than their counterparts who go and seek new loans in the market. The reason is that most Banks and Financial institutions go out to offer the best rates to new customers.
The industry term used for transferring your loan from one bank to another is called Balance Transfer
Steps involved in getting your Loan transferred from one bank to another:
Submit your request to the existing lender requesting for transfer of loan. One of the options to keep in mind is that try and negotiate with the current lender to revise the interest rate by sharing the new options available from competition. Every Bank has some flexibility to retain existing clients in case there is a risk of losing them to competition.
-The lender will issue an NOC and statement of account mentioning the outstanding amount. This step is a formal Go Ahead from the existing lender that there is no problem in letting the loan get transferred.
-The new lender will sanction your loan basis these documents and will inform the existing lender for the same. This step is similar to getting a fresh home loan sanctioned. An application form has to be filled up and all supporting documents provided. A personal discussion and property evaluation is done by the new bank
-The new lender will make the payment to the existing lender and take over the property documents. The original property documents held by the first bank are handed over to the new lender against the payment of the outstanding loan value
Things to check before availing Balance Transfer for your Home Loan:
-Check the rate of interest offered by the new lender
-The existing lender will levy a pre-payment penalty on the balance outstanding of the loan (this varied between 2% - 4% of the outstanding loan amount)
-The new lender will charge a processing fee for sanctioning the loan Keeping in mind the overall cost of the transaction it may still be wise to switch to a new lender in the market and save
cost for the outstanding period of the loan.
Other Benefits of availing a Balance Transfer on your Home Loan
- Better Service from the new lender : A lot of clients are moving away from Nationalised Banks and transferring their loans to Private Banks, Foreign Banks and NBFCs. Since Home Loan as a product is long term in nature, it is wise to avail services of a professional player.
- More suitable terms especially loan tenure etc : New players sometimes offer more attractive terms that can help you especially with restructuring the EMI amount.
- Availability of a Top-Up on the loan amount against the same property : The same property can be used to avail an additional amount as a Top-Up. If you are seeking additional funds then your existing mortgaged property can be leveraged very effectively as a collateral. The cost of borrowing would also be one of the lowest.
