Home loan bears great importance and with virtue of this, it holds quite a high-interest rate. The demand for home loans is high as everyone wants to own a home for either commercial or personal use. Home loan is a debt that sticks around with a person for up to 20 to 25 years. As the duration is high, a person ought to get worried about the interest rate in the long run. The idea of having a home is fancy though. The burden that one needs to bear for the rest of the years can be stressful. The stress is not the duration but the interest rate that can easily vary from 8% to 13% approximately. Every bank has a different rate of interest.
What should a person do in such stressful situation? Transfer of home loan balance is the option that one can opt for in order to at least pay the EMI at a lesser rate of interest. In the perfect competition where almost every bank is providing home loans, each of the banks tries to attract the customers of an existing lending bank by offering loan transfer at a low rate of interest. This definitely is a loss for the bank that has already lent the loan but a situation in favour of the borrower.
What should be your preparation before you get the loan transferred to other banks?
Before you take the decision of getting the home loan balance transferred to another bank, following points should be considered.
• Check the amount that is yet to be paid. If the amount to be paid is not even half of what you have paid, then transferring the balance doesn’t make sense.
• If the tenure is negligible, even then the transfer would not be profitable. For eg, you have a tenure of 20 years and you have already paid for 16 years. What will be the benefit in the next four years?
• Make sure the interest rate offered by the new bank is comparatively lower than the one you are already paying. Paying 1 or 2 % less than the current interest rate wouldn’t give you a marginal profit.
• The rapport of the bank in balance transfer and then the continuity should be investigated. A poor service in the past can be a hint that this shouldn’t be done.
How should you now transfer home loan balance?
The first step towards home loan balance transfer to a new bank after all the above factors have been taken into consideration is to shortlist a few banks you would want to apply to.
After a proper rain-check, decide the best bank offering you the best rate for the home loan transfer. You now apply for the balance transfer to the existing bank.
Various fees like foreclosure charge, processing fee, stamp duty, incidental charges etc. will be deducted. There would be no foreclosure charge in case the home loan is at a floating rate of interest. The processing fee can be around Rs. 10,000 or it can go up to 1% of the total loan amount disbursed. The stamp duty which is from 0.2 % to 0.5% on the existing mortgage is applicable on few states other than Delhi and NCR.
It should be noted that if you are from Maharashtra, then incidental charges should be paid. There is no exemption to it.
The existing bank should give you a sanction letter which can be shown to the new bank chosen. It is important that all the property documents secured with the old bank should be submitted to the new bank that has disbursed the required amount to the old bank.
Well, this is how the transfer of home loan balance is done from one bank to another. This is applicable to property which is already owned by you. What if the property is still under construction and you want the balance transfer to be done? This is a question that most people come across and gets into dilemma to take the right decision.
Transfer of home loan when the property is still undergoing construction
This is a situation that sounds tricky but the process of transfer of balance is not. Check with the new bank the eligibility of balance transfer depending on various heads like a security deposit, electrification charges etc. There can be a plus minus in the process that you may need to do. Make sure you are not stuck between the disbursements of the balance with any payment to the builder. So, buy time for the loan transfer.
Before the bank approves the transfer, the builder will have to issue a new permission to mortgage known as PTM. This must be done as the previous bank will no longer pay for the property.
It is that simple. It is interesting to know that when one wants a home loan, the interest rate is high and when the same bank approves for the balance transfer, the interest rate is lower than what is approved for a new loan.
Many people do prefer home loan transfer for the benefit of paying the EMI at ease.