- Check interest rate track record of the new lender You must check that the lower interest rate being advertised by the new lender is real and not a shot term gimmick. Please ask your loan adviser for the benchmark rate track record of the new lender.
- Satisfy yourself about service quality of the new lender Check that the service quality offered by the new bank you are choosing is up to your expectations. Lower rate should not come at the cost of inferior service.
- Check the benchmark rate There are two commonly used benchmark rates for home loans – MCLR rate in case of banks and prime lending rate (PLR) in case of housing finance companies. MCLR bench marked loans are known to be more transparent and hence preferable over PLR bench marked loans.
- Is the spread variable or fixed Interest rate on floating rate loans consists of two parts – benchmark rate and spread above it. While the benchmark rate is expected to change over time, the spread is supposed to remain constant except in case of a default. However, some banks offer floating rate loan with both the benchmark and the spread being variable. In case of many such loans, borrowers see their loan interest rates rise sharply after a few months. So, avoid loans with variable spreads and instead opt for floating rate loans that vary interest rate only with change in the benchmark rate.
- Estimate transaction cost Check the cost that you will incur for effecting the change. These include processing fees, stamp duty (in some states like Maharashtra) and documentation charges.
- Issue notice to existing bank Some banks insist on a prior notice before you can prepay your home loan. Check your loan agreement carefully and ensure that due notice is given to or waived by your existing bank.
The process to transfer home loan on under construction property is similar as that of of ready to move property. However, in case on under construction property, you need to take care of few additional points:
- Check loan eligibility as per new bank Cost of property consists of multiple heads such as basic price, preferred location charge (PLC), external development charges, internal development charges, security deposit, electrification charges, power back-up charges, service tax, fire fighting charges etc. Norms for inclusion of each cost head differ across lenders. In case your chosen new bank does not include some of the heads in the cost of property which were included by the old bank, the loan eligibility may come down and you may need to increase your own contribution.
- Select the right time to do the loan transfer The process of loan transfer may take 10-15 days from the date of application and your existing bank may typically take another 10-20 days to handover property documents to the new bank. You will not be able to avail further loan disbursements during this period. Hence, it is important you time the transfer of your loan at a time when you don’t expect any fresh demand from the builder for the next month or so.
- Get fresh Permission to Mortgage and Tri-partite agreement A builder will need to issue a fresh permission to mortgage (PTM) to the new bank and enter into a new permission to mortgage. This typically takes no more than 2-5 days but borrowers must check with the builder.
In summary, balance transfer is beneficial to borrowers as it helps reduce cost of borrowing significantly. Home buyers and home loan borrowers must exercise caution in the process of balance transfer so that the process is smooth.
Additional Documents for Loan Takeover / Transfer
|Loan statement (loan track) and list of property documents (LOD) in possession of existing lender||✔||✔|
|Last 12 months’ statement of bank account from which loan EMI is paid||✔||✔|
|Application Form with photo and signed by Primary Borrower and Co-borrower(s)||✔||✔|
|Identity Proof of Primary Borrower and Co-borrower(s)||✔||✔|
|Residential Address proof of Primary Borrower and Co-borrower(s)||✔||✔|
|Age Proof of Primary Borrower and Co-borrower(s)||✔||✔|
|Office address – ownership/ lease / rent agreement/ utility bill||✔|
|Last 3 years’ Form 16, last 6 months salary slip, last 6 months’ bank account statement showing salary credit||✔|
|Last 3 years ITR (self and business), profit and loss account, balance sheets certified/audited by a CA. Last 12 months bank account statement (self and business)||✔|
|Certificate and Proof of Business Existence||✔|
Asked Questions on Home Loan Takeover
What is the maximum limit for the transfer of amount?The maximum amount to be transferred is equal to the outstanding amount. However, you may avail top up loan such that the total loan including home loan and top up does not exceed 75% of market value of the property.
When should I avail the house loan balance transfer?In case you are paying higher interest rate than those available in the market and the difference is more than 0.5%, you may consider transferring your loan.
When should I not consider transfer ing my home loan?You must not switch if one of the following situations is applicable:-
- Prepayment penalty is payable to current bank – this is valid in case of fixed rate loans
- You plan to sell the property in the near future
- The balance period of your existing loan is less than 2 years
What are the home loan transfer charges?At the time of housing loan transfers to new bank, you will need to apply afresh for home loan. Applicable charges include processing fee (unless waived by the bank), stamp duty (ranges from nil to 0.5% of the loan amount depending on the state ion which the property is located), valuation charges (chargeable in some banks) and lawyer’s fee (chargeable in some banks).
Can repayment period be extended at the time of transfer?Yes, repayment period can be extended up to the maximum tenure allowed by the new bank subject to the condition that the borrwoer’s age at the end of the loan tenure must not exceed 58 or 60 years in case of salaried borrowers and 65 or 70 years in case of self employed borrowers.
Can I get a top up loan at the time of balance transfer?Based on your eligibility, the lender can offer you top up on the home loan to be transferred to the new bank but there may be processing and legal charges applicable.
Do I require a guarantor for home loan transfer?Most of the banks do not require a guarantor for taking over an existing home loan.
Is it possible to merge two existing loans through balance transfer?Yes, it’s possible to merge two existing loans into a single loan with to get lower interest rates.
How much time will it take to transfer my house loan from existing bank?It might take around 15-20 days for the house loan to be transferred to the new bank.
- Home loan balance transfer can be availed at interest rates starting from 8.05% along with special offers for home loan top up, home credit facility and Nil processing fees. Check Best Offers
- If you are paying an EMI which is significantly more than Rs. 762 per lakh of loan amount, you should transfer your loan to another bank.
Home Loan Transfer Process
Must watch if you are paying more than the lowest interest rate of 8.05% on your home loan
You can opt for home loan balance transfer if you have outstanding home loan in one bank. Basic eligibility criteria are age, income, employment history and loan to value ratio. Other main eligibility factors which are important for refinance home loan –
- Applicant must be running an existing home loan from another lender
- Some lenders may require that an applicant should have paid at least 6 to 12 EMI’s on existing loan before opting for balance transfer. However, at times, this condition may be waived and home loan takeover may be possible even if the loan has not run for 6 – 12 months
- There should not be any default in payment of EMI on existing loans
- In case of under construction property, the project must be approved with the new lender. Note that balance transfer of home loan on new property whose possession has been handed over but registration has not been done may not be possible
- In case of ready property, registration should have been completed