Home loans help people fulfil their life-long dream of becoming property owners. Today, you can approach a bank or a housing finance company to fund your loan. You can just as easily switch lenders if you find one offering a reduced interest rate that leads to better savings. However, if you are contemplating transferring your home loan to a new lender, there are five things you should ensure. They are as under:
- If you are planning to transfer your home loan to a new lender, Check-out the five things you should ensure before transferring your home loan. Ensure that the remainder repayment period exceeds five years
If you wish to transfer your home loan to another lender, you should do it when you still have a repayment tenure exceeding five years. Typically, most borrowers choose to transfer loans when they find another lender offering reduced interest rates or when the RBI slashes home loan interest rates. However, switching lenders when you have tenures lower than five years does not make much economic sense since you have to bear the loan processing fees and other miscellaneous charges once again when you switch lenders. Also, higher repayment tenures help you avail the benefits of reduced interest rates. Thus, if you have to, you must switch lenders as early as possible and not wait until the end of your loan repayment tenure.
- Ensure you’ve never defaulted on EMI payments
If you wish to explore the possibility of switching your home loan to a lender offering reduced interest rates; then you must ensure that you never default on EMI payments. It is essential to make your EMI payments on time since lenders do not entertain individuals with irregular track records when it comes to EMI payments. When you apply for loan transfer, the new lender will get in touch with your existing lender, check your loan account statement and then analyse whether to accept your loan transfer request based on your current repayment track record.
- Ensure you have all the property-specific documents in place
Home loans are high-value loans in which documentation plays a crucial role. To transfer your loan to a new lender, you must ensure you have all your personal as well as property-specific documents so that there are no obstacles in the loan transfer process. You need to meet with your original lender and get a statement stating that they will dispatch all the property documents to your new lender within a specific time-frame. Remember, that the new lender needs these documents as collateral until you repay the loan in full, so you must ensure you have effectively communicated their requirements to the original lender.
- Ensure you do not have to pay any prepayment penalties
The RBI has banned both banks and housing finance companies from levying any prepayment penalties if you wish to close off your loan before the stipulated tenure. Lenders may not levy the penalty on floating rate loans as well as fixed-rate loans after a specific number of repayment years are completed. However, when you transfer a loan, the new lender may state that these penalties exist for individuals transferring the loan. The new lender may not consider the overall repayment tenure that you’ve completed before transferring the loan; just the new tenure of the loan. As such, you must ensure that you do not have to pay any prepayment penalties, should you choose to repay your loan before tenure.
- Ensure you negotiate the loan processing fees
As mentioned above, lenders charge a loan processing fee when you take on the loan for the first time. The new lender also levies a loan processing fee, when you transfer the loan. However, you can easily get this fee waived off by negotiating with your new lender. If you’ve repaid EMIs on time, you can easily get the waiver on the loan processing fees. On the other hand, some lenders do not charge processing fees when you choose the balance transfer option. For instance, The State Bank of India has currently waived off the processing fee on balance transfer loans. Final words:
Home loan balance transfer is a great option that can help reduce the interest payable against your home loan. It can result in a massive amount of savings, especially if you are repaying a high-value loan. However, to gain benefits from this facility, you must ensure that you keep an eye on home loan interest rates, especially if you’ve opted for long-tenured loans.