Transfer of Home Loan
A home loan is an important part of the home buying process. Every home buyer is well aware of the need for a home loan which makes buying a home easy. We all know how difficult and time-consuming will it be to save the entire amount to pay the entire price of the property out of the pocket which is simply next to impossible for a salaried person. Adding to it there’s the rate of interest that the borrower should take care of. When it comes to a home loan, everything matters, be it the principal amount, rate of interest, type of interest rate, buyer’s credibility, eligibility, the time taken to process the home loan application, disbursement of the amount, lender’s records, etc. Hence, it is always important to do careful planning beforehand about the financial situation.
When applying for a home loan, it is always advisable to apply for the right home loan amount and find the lowest possible interest rate as per your home buying budget. The lenders often come up with their own set of offers to attract more customers. At times the buyer may find cheaper rates than what he is being charged currently and wish to switch to the lender offering cheaper rates. It is possible to switch lenders under such circumstances although a fee would be incurred.
As mentioned above it is possible for a borrower to switch to a different lender for lower interest rates or for increased tenure due to any reason. So how the process of transferring a home loan works?
What to do ?
In order for the transfer to take place, the existing lender needs to be paid first before relinquishing the original property documents. When the buyer applies for a transfer he asks for a letter of authorization from the current to the new lender. The letter includes the details related to the outstanding loan amount, the list of property documents, and a stipulation that the current lender will hand over the property documents to the prospective lender once the outstanding is cleared.
The new lender will carry out the same procedures to check the eligibility of the borrower such as the capability of repayment and credit history. It might also happen that the new lender may reject the transfer application if the credit report is unsatisfactory.
To switch your home loan to another lender, the buyer is subject to pay charges to both the current and the new lender. However, in case the home loan is being charged based on floating interest rates, then as per the RBI mandates, no prepayment charges are incurred. In case of fixed interest rates, the prepayment charges are waived off if the borrower repays the loan out of his own funds instead of taking assistance from any other lender.
The lenders’ charge may vary from 0.2% to 0.75% of the loan amount applicable to the switch. It also depends on the applicant’s profile and there are times when the lenders may waive the transfer fee or charge a very nominal fee. The new lender may waive off the balance transfer application charges, however, the applicant must pay the stamp duty charges as usual. Remember, these are highly monetary intensive processes and to avoid any error, it is always advisable to take professional help.