All You Need to Know about Transfer of Your Home Loan

A number of existing home loan borrowers, who are not satisfied with the services of their existing lender, are now choosing to transfer their loans to another bank. The transfer of loan, also called refinancing, has become popular in the Indian market, nowadays. The main reason of transferring a home loan is to get advantage of a lower rate prevailing in the market. Apart from this, there can be few other reasons, such as:

All You Need to Know about Transfer of Your Home Loan

  • When you are not satisfied with the services of your existing lender.

  • When your existing lender is not flexible enough to incorporate something new into the scheme.

  • When you want to increase the tenure of your loan or decrease the EMI, but the current lender does not agree to it.

  • When the value of your property has shot up much above the original value and you want to top-up your loan for renovation or other requirements, but the lender does not agree to it.

Process of Refinancing- Refinancing of your home loan is a simple process. Once, you decide on a new lender for your home loan, you have to submit an application to the existing lender for the transfer of your loan. The bank will then handover to you a statement mentioning your outstanding amount along with a letter of consent for the transfer. After you submit these documents to the new lender, they will sanction your loan amount to the previous lender after which your loan account with them will be closed. Your loan with the new bank will be treated as a fresh loan. Documents, credit score and financial statements will be analysed again.

Costs involved in Refinancing

  • Processing fee- It is to be paid to the new bank. It is usually 0.5% to 1.5% depending on the bank; you can also negotiate the amount.

  • Stamp duty- Banks have to pay stamp duty to the government on the title deed and this amount is recovered from you.

  • Prepayment penalty- Sometimes, it is to be paid, only in case of fixed rate loans. You must discuss this with your bank, beforehand.

  • Other legal charges may also incur.

Things you must keep in mind

  • You must always try to transfer the loan during early tenure of payment. If only a few years of payment are left, there is no benefit, whatsoever.

  • Don’t fall prey to the teaser loan scheme. Several banks come up with their teaser scheme during peak times. You must understand that these rates adjust over time, so you may end up losing more than gaining out of the transaction.

  • Make sure that both the banks complete the documentation formalities within the stipulated time frame, otherwise it is you who will have to suffer the hassles.

  • A loan transfer is possible only if you have made regular payments to the current lender. So maintain a good flow of repayments.

You must keep in mind all the pros and cons of transferring your loan to the other bank. Do not get lured by lower interest rates, take a good look at the other aspects too. Do not hesitate in asking questions.

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