Transferring your home loan can be a tad difficult. But, not when you know the norms and procedures right. Any borrower who wishes to transfer the loan from one bank to another should always start by keeping a watch on the interest rates as well as the periodical offers. A borrower, no matter what, is in full liberty to shift the home loan from one bank to another in the hope of a better interest rate. Sometimes the decision to transfer one’s home loan is due to the fact how one looks to increase the tenure of one’s loan. Furthermore, a customer wanting o get a top-up on the existing loan might opt for transfer it to a different bank, following a refusal by the current bank. Here’s a look at all that you need to know about transferring one’s home loan, quick and easy.
Knowing the Basics
To transfer a home loan for your 3BHK apartment in Kolkata, it is required that the existing lender needs to be paid, to grant the release of property documents. Also, the new lender will not issue a cheque to you if you fail to produce the property documents. So, how does one go about dealing with the dilemma?
As a borrower, one will have to state his desire to shift his lender by writing an official letter to the branch manager of his bank. Upon receipt of the letter, your branch manager might call you to reconsider your decision as no bank wants their customers to close their loans or shift it with a different lender.
If you have already made up your mind, stick to your decision, and get the release to produce the property-related documents in front of the new lender. Also, gain a clear understanding of what all is outstanding in your name and ensure the undertaking from the previous lender stating that no other property documents are lying with them. The new lender shall conduct their line of due diligence as well and will visit the property to assess the value and further asses the repayment capacity of the borrower, taking his track record into account.
Upon a successful assessment, the new lender might agree to accept the transfer of loan, subject to the fact that one has a good credit history and an excellent payment record.
Charges Involved While Transferring a Loan
Transferring a loan from one lender to another doesn’t end with getting the paperwork right. It also includes the charges that one has to pay to one or both lenders. Now, there can be a couple of scenarios while shifting your lender. One, where your existing lender may choose to levy prepayment charges on the loan amount, but in most cases, they do not do so, keeping in terms with the norms prescribed that prevents banks and housing finance institutions from charging prepayment charges ion fixed or floating rates. This is subjected to the fact that as a borrower, you choose to prepay the loan with your own money, rather than borrowing it from any particular lender. Additionally, the borrower might have to pay towards the processing charges levied by the new lender, which usually ranges between 0.2% to 0.75% and from one lender to another and the applicant’s profile.
Sometimes, the bank offers a waiver on the charges to attract customers and also in cases when you have a good credit profile, and you are transferring a substantial amount of loan.
Generally speaking, applicants should always remember that the processing fee charged by the bank is absolutely negotiable, and one should continuously bargain to waiver or minimize the transfer processing fee. Other than the processing fees, the additional costs that one has to think about are stamp duty as well as the registration charges to be paid for the mortgage. Besides, the bank might ask the borrower to pay for the valuation charges in case the new lender is opting for a new valuation and doesn’t want to rely upon the past figure.
To successfully transfer a loan, a borrower needs to submit an application to the current lender, following which an NOC is issued along with documents that state the outstanding amount. These two documents need to be forwarded to the new lender, where one desires to shift his home loan. The new lending bank will now treat the application as a fresh one and subsequently proceed with the documentation that includes the usuals like proof of employment or business, id proof, bank statement, etc.
It is to be remembered that the transfer of home loan requires one to have the documents in order, with proper follow up and coordination. As such, issues may crop up if the original loan is taken jointly, and one of the borrowers has already retired, or his income level has reduced. Furthermore, the new lending institution may refuse to take over your existing loan if one has a track record of irregular payments. However, if all your documents are okay and you have a good track record of repaying loans, the new lending bank will be ready to take over the loan and settle the dues with your previous lender.
Why Transfer of Loan is an Open-Minded Risk
Once bank-to-bank transactions are completed, and the property papers are hand over, any ECS instruction on your account is cancelled along with post-dated cheques issued in favour of your previous lender. Nevertheless, the bank that agrees to give away the loan runs open-ended risks as the existing bank will only release the mortgage papers after they have received the outstanding in full. However, it’s a welcome risk for the new lending institution as they get to procure a new customer listed on their asset side.
So, if you are already running a loan from a particular bank and want to switch over to another lender for a low-interest rate, be very careful and think again. If possible, continue with your original lender as the takeover takes a lot of factors into consideration before the permission is granted.
Disclaimer: This article is not intended to constitute formal financial advice. If you are thinking of changing your loan provider or refinancing please consult a registered financial agent.
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