Transferring your home loan balance is an option if you think that you can get the same at a lower interest rate from a new bank than the former. You may transfer the home loan for various reasons (financial causes, unsatisfactory customer service from the existing bank etc.), but doing it the right way is what we are going to explain in the following post.
Analyze the Cost Benefits
Here is how you can judge the viability of your home loan balance transfer as per the cost benefits:
- If the loan is set on a high floating interest rate, then it is best to get it transferred to a lower interest rate.
- But, if the loan is based on a fixed interest rate, then you may have to pay a pre-payment penalty for the transfer, and thus it is inadvisable to go through a home loan transfer in such cases.
- If the home loan is on long repayment tenure, then the transfer can bring higher cost benefits.
- Understand the other charges and costs in the loan transfer process, such as those required for documentation, processing fee, Stamp Duty and others.
Obtain NOC from your Current Bank
The second step involves getting a NOC (no objection certificate), from the current bank along with:
- Your payment history
- Foreclosure letter
- Relevant documents with the bank
It may take a few weeks or less to obtain the NOC. The existing bank may try to retain you from transferring the home loan balance by offering a reduction in the interest rate. Sometimes, you can take this offer and bargain with another bank, and decide on the best deal.
Apply for Home Loan Transfer with the New Bank
After receiving all the documents, you can apply for a home loan transfer with a new bank of your choice.
- You will also need a NOC from the respective real estate developer/housing society.
- Submit the ownership proof of the house, and your income proof to the bank.
- Now, the bank will check your ability to meet the EMI payments. While making the application, sometimes you can opt to top up the home loan balance in order to reduce the tenure or EMIs.
Bank Checks your Eligibility and Credit Worthiness
The bank evaluates your loan application to decide your eligibility status, and it may enquire you further on details. An extensive background check is maintained for credit approval, and shall include:
- Checks on your credit history, and re-evaluation of your home loan. Verify the authenticity of ownership. In case a need arises for additional documentation, the bank will contact you regarding the same.
- After the credit approval, the bank will provide you with a letter informing you about the interest rate on which the home loan balance transfer is sanctioned, with other terms and conditions.
- You have to make your final call- to switch the home loan from your current bank to a new bank or to switch the home loan in the existing bank at a lower rate of interest.
Submit Documents at the Chosen Bank
Now you have to carry out the documentation procedures with the bank you choose. This is done at both ends- with the old and the new bank to complete the switching process.
- Sometimes, the old bank asks you to pay for the balance principal amount, but the new bank only does so after receiving all the documents.
- To get past this situation, a meeting is held between the two banks’ representatives to do the necessary.
While all the above-explained process is about a manual home loan balance transfer process all performed by yourself, you can rather opt to get the home loan transfer done from loanbaba.com, which helps you to smoothly sail through this process online, without any difficulties.