Rate hike: You can transfer balance with these cheap home loans – What is a home loan balance transfer? | The Economic Times
What is a home loan balance transfer?
Transferring the outstanding balance of a home loan from an existing lender to a new lender is known as balance transfer of home loan. To put it simply, whether you call it switching, balance transfer or just transfer, it refers to a loan being taken over by another lender by paying off the old lender in full, after which the borrower will start paying the equated monthly instalments (EMIs) to the new lender. This is mostly done by a borrower to take advantage of lower interest rates or a loan with better terms and conditions. If you are planning to transfer your home loan to another bank, here is how to do it.
Foreclosure of existing loan
The first thing that you need to do if to apply for a foreclosure, get a statement of account and list of property documents from your existing lender. If the old lender does not release the property documents, the new lender can release the payment against a letter from the prior, having details of the legal papers held by them and the number of days it will take them to release the documents, after loan settlement.
How to transfer home loan balance?
These are steps to transfer the balance of a home loan, according to the Bajaj Finserv website. Make an application to your current lender Inform your lender that you seek a balance transfer via a letter or a form, carefully listing out your reasons.
Collect the No-objection certificate
Your lender will get back to you with an NOC or a consent letter and your new lender will require it when you file your application.
Hand over your documents
Contact your new lender and hand over all your documents. Apart from submitting essential documents like the NOC and KYC documents, you may also have to submit a copy of your property papers, loan balance, and interest statements, and a filled application form.
Get confirmation from the old lender
After submitting all your documents to your new lender, await final confirmation from your old lender concerning the closure of your loan account. This certifies that the loan contract has ended, as have the terms governing it.
Pay all the fees involved and start afresh
Sign a contract with your new lender and pay the fees that are due. Once this is complete, you can pay your next month’s EMI to your new lender.
Documents required for the transfer
According to the SBI website, below documents are required from your current lender:List of original documents held at BankLoan a/c statement for the past one yearSanction LetterInterim Period SecurityNew loan agreementOnce sanctioned, a fresh loan agreement is executed between the borrower and the new lender. The new lender will issue a cheque in favour of the old lender equivalent to the outstanding amount.
Examine the processing fee (which is typically up to 1% of the loan amount).If your credit score—which represents your credit history and credit worthiness—is acceptable or if they are running a special promotion for a limited time, a lender or bank might occasionally lower or waive the processing charge.
When should you consider a home loan balance transfer?
Home loan borrowers should note that the advantages of moving a mortgage must outweigh the costs. According to experts, the interest rate differential should be at least 50 basis points between the two lenders if you are planning to transfer your balance. Also, do consider the fees and penalties while seeking a balance transfer.