Most of us are confused while seeking a home loan predicting it to cause trouble in the coming future.Home loan transfer can happen based on various aspects and is also denoted as loan transfer. Reasons like increased interest rates and others lead to loan transfer. If your interest rates are higher than your EMI, consider switching your lender. You can do this by seeking the help of the price and features through the comparison engines online. There are various ways through which you can opt for the best home loan financer. Doing this will also give you a clearer picture of what you are actually looking for.
In order to get complete details about the ways to get the best home loan, there are few procedures and costs which are to be followed.
The loan seeker should take financial as well as documentation aspects into consideration.
Although the prepayment results in the penalty apart from the enormous funds, perhaps it is always better to switch to another lender rather than paying a huge amount of interest. This process is also known as Balance Transfer (BT).
Home Loan as a business to the banks:
The balance transfer is mainly associated with two important aspects like the processing fee and the prepayment penalty. One of the major advantages of the home loan procedure is the lending aspect wherein the banks make business by lending the money and in turn are benefited and make money through the interest on the loan. Due to this, most of the banks charge their customers in case he/she wants to switch the lender. The amount which the bank charges its customer at the time of loan transfer is known as the prepayment penalty. The prepayment penalty can be charged up to 2 % of the total loan outstanding.
However, apart from just the bank charging the customer for loan transfer, the new bank which will be taking the customers amount will also charge for taking over the loan as a processing fee. The processing fee can be up to 0.50-1% of the total loan amount. It is very important that the customer is well aware about the probable terms and conditions which are related to the home loan transfer before switching his lender.
Does switching a home loan actually benefit a customer?
Most of the home loan seekers are in a dilemma that switching a lender will not make much difference as all the banks are subjected to make their business by lending money and charging interest rates. Most of the customers feel that all the banks have interest and make a very little difference and hence do not prefer switching the loan. However, all of these aspects can be proved false and switching a home loan lender will make a difference.
One of the important benefits of switching a home loan lender is to enjoy lower interest rates. Various banks are well known for charging lower interest rates to their new customers rather the existing loan seekers. This is one of the major causes wherein the older customers are uncomfortable paying the higher interest rates and henceforth opt for a loan transfer.
Henceforth, a loan transfer is really wise if the interest rates are lower than the EMI. Few important points to be considered by the customer before switching the loan are to shop for a deal and interact with various lenders.
Factors influencing the loan transfer of a customer:
One of the main factors influencing the customer’s successful loan transfer is the amount of income and the repayment track record. The customer should make sure that he/she is aware about the loan transfer offers from the lenders.
Instruction on how to switch the home loan:
- Firstly, if you have decided to switch your home loan to another bank, you should discuss your intent with your current bank.
- Submit a letter to the current bank stating about the loan transfer. This has to be done by writing it clearly.
- Before you end the relationship with your current lender, it is very important that you negotiate with your bank. This will also help the borrower to make the current bank realise about the lack of facilities in the current bank. Perhaps this might also cause the reduction of the interest rate from the current banks.
- After the negotiation, the customer receives a consent letter stating that the customer is permitted to transfer his/her loan to another bank. This letter will also have details like the total loan amount taken, the loan amount outstanding along with the prepayment charges.
- The complete amount mentioned in the letter will be calculated on a future date and gives the customer time to arrange the payment. The customer can approach any potential lender for his balance transfer.
Instructions during the loan transfer to a new bank:
- The customer has to fill in an application form with the requisite details, along with a personal discussion.
- The customer should have all the original documents pertaining to the information provided on the application form for the personal discussion.
- The discussion is followed by a field investigation and valuation of the property. The credit appraisal will be followed by the disbursement of the loan.
- It is necessary that the customer submits all the necessary documents to the current lender before the disbursement.
Source: Commonfloor Articles
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