The home loan transfer is also known as balance transfer or refinancing. It gives a facility to the borrowers for obtaining advantages of lower interest rates in the market. The borrower shifts from one bank to another that offers him with affordable interest rate.
You may have completed two years of paying your loan repayments with a bank. You have a discussion with your bank manager for revising the interest rates as you have maintained track of timely payments. . If your bank manager is not in a position to do the same, you have an option to shift to another bank and acquire lower interest rates. Thus, you acquire a golden opportunity to take advantage of the falling interest rates in the market. This initiative of the Reserve Bank of India helps the current borrowers a lot.
Understanding the overall process of balance transfer
You are required to approach your current bank with an application letter for loan transfer. Your current bank will issue a NOC or a consent letter which is required to be submitted to the new bank. The outstanding amount needs to be mentioned clearly. Your previous loan account is closed and the property documents are forwarded to the new bank. You must be attentive whether your current lender is dispatching the property documents to the new lender within the prescribed time-frame. Donβt forget to cancel the ECS or postdated cheques provided earlier. The new lender will offer you loan at existing interest rates prevailing in the market. It should be noted that you have paid all the loan repayments to your current lender in timely manner.
Prepayment penalty is no more into picture
Earlier, the current lender followed a practice of charging prepayment penalty. But recently, some of the banks have cancelled this payment of penalty. Hence, before applying for a balance transfer, check with your bank about non-payment of penalty. You are not required to pay it under certain rules of RBI and NHB.
Fees and procedures
You have to incur certain expenses and undergo complex processes. First of all, you have to pay processing fee to the new bank. But remember, you can discuss with your new bank manager about it. You also have to implement procedures like credit appraisal, technical assessment, checking the legal aspects of the property documents. If all these procedures are carried on smoothly, then a fresh loan will be granted.
Consideration of other reasons of balance transfer
One of the reasons for balance transfer remains getting benefit of lower interest rates. But you have to check with other reasons too. You bank is not willing to reconsider the loan terms and conditions. You may need a top-up loan but your bank is not willing to grant it. You are not at all satisfied with your bank services. If you are gaining advantage of one or two points, then your decision of balance transfer stands correct.
Thus, with balance transfer, you can save a considerable amount of interest. One should follow the process properly and carefully.
