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Home loan transfer is an option to convert your higher rate of interest into the lower one. It is a good option for those who are paying the higher rate of interest on their home loan. It will help them to reduce their financial burden in long-term and even on monthly basis. People, whose loan is running for 2 or more years and have to deal with higher rate of interest compared to the latest one of the bank, they can ask their lenders to reduce the interest rate provided their past repayment track record is good. In case if the bank is not ready to make the changes in the present rate of interest, you can search for a lender who is offering loan at lower rate of interest.
Before changing your lender, calculate the new charges and other costs linked with your amount transfer.
Some banks charge transfer fee from the customers. However, some have waived this fee. Also, remember that you need to pay the processing fee to the new bank as you are a new customer to them. You can negotiate on this part with your new lender. Generally, banks charge 0.5% to 1% fee or standard Rs. 5000 for processing the transfer loan. You should compare all transfer costs and other charges linked with this process before transferring your amount. If the calculations are not going to make big differences in the amount you are paying presently, then you should not switch your lender.
For an example, if you have borrowed the loan of Rs. 30,00,000 at the rate of 10.75% for 25 years. Your monthly EMI will be Rs. 28,863. But, if you are opting for balance transfer of your loan and you have already paid interest for two years in that bank and now avail the loan for 23 years and your new rate of interest will be 9.65%, then your monthly EMI will be 27,096. This is going to make a difference of Rs. 1,767 on monthly bases. You are going to save Rs. 21,204 yearly. So make your decision based on calculations.
|Rate of Interest||Monthly EMI||Yearly Payment||Yearly Saving|
|Existing Bank||10.75%||Rs. 28,863||Rs. 3,46,356|
|New Bank||9.65%||Rs. 27,096||Rs. 3,25,152||Rs. 21,204|
Keep it in mind that the new bank will treat you as a fresh applicant while you switch your loan there. As part of this, you will have to go through all the processes again in the new bank. This process will involve credit appraisal, legal verification of property, technical verification and your repayment history with previous bank. Besides, considering the lower rate of interest, there are other reasons as well to switch your loan. Here are some reasons to switch your loan from present lender to new lender.
Bank is not willing to change tenure: You might want to re-negotiate some terms with the bank and it is not willing to reconsider the terms again. For instance, you want to extend the tenure of your home loan, but the bank is not willing to change it as per your requirements.
Top-up loan: The property value might have increased from the original price when you booked your property with the builder, and so you need to pay additional amount as asked by the builder. In that situation to meet your increased financial liability you want to avail a top-up loan, but the bank is not ready to provide you any top-up loan. In that situation, you can search a new lender to meet financial requirements.
Service issues with bank: Once you avail the loan from the bank, you are their customer. But, sometime banks don't treat you well or you are not happy with their services and accessibility. Therefore, you want to change your bank.
It is always good to switch your loan in the early years if you face any issues with your lender. Ask for your loan statements and other documents before you apply to any other bank for transferring your loan. Always keep in mind, if you are not regular with your payments with the present lender, it will be tough for you to find a new lender.