Taking a home loan in itself is a big decision an individual can take in their lifetime. There is so much to think and research before you finalize the loan. However few years down the line, the market changes. These changes affect your borrowing amount and it might either scale in your favor or it won’t. What we mean to say is that either you might have to pay more or pay less for the remaining tenure of the loan. This is unfair to you and hence we have 5 tips to help you understand how and when to shift a home loan:
Why should you shift a home loan?
There are few reasons why you would want to shift your home loan. It is possible that you being an old customer is currently paying a higher rate of interest to the current bank/NBFC and there are new customers who are being offered lesser rate of interest. Also, the difference in rates can convince you to shift the lender if it means that you save a lot of money on EMI. Finally, it is possible that due to any reason, you are finding it tough to pay the current EMI. You therefore request the bank to help you reduce this burden by increasing the tenure. If the bank doesn’t oblige, then you can shift your home loan.
Check the rate:
This is one of the main reasons why people think of shifting their home loans. But it’s best to be cautious. Why we say this is because banks keep increasing or decreasing their rate of interest. If the rate hikes are not yet done, then it’s wise to wait. If the rate hikes are done and they are at least equal or above 50 basis points then you can transfer your home loan. Also, you need to remember that the process of transferring a home loan is not entirely free. Keep in mind the paperwork and time factors before making your new choice.
Negotiate with the lender:
Nobody likes to pay more than the others. Especially when it comes to loans, they want to pay as less as possible. Hence before you could shift your loan to the new lender, try negotiating with your current bank if they could lower the loan rates. Banks usually do not like to lose their customers and hence they might accept your request. Most of the banks however give the conversion option to you wherein you pay a small fee of around 0.5/1.5% and shift to the lower rate being charged to the new customers.
Conditions of the new bank/NBFC:
It’s not always that you get to transfer the lender. If you can fulfil the bank’s criteria, then you can go ahead with the transfer. The main condition is your prepayment record with the previous lender. If you are a defaulter or pay late for few months in a row, the new bank can decide to reject your loan transfer request. If the property under construction is running behind schedule and if it is not on the new bank’s pre-approved list, then the new bank might reject your request.
Procedure and Costs:
The basic procedure of transferring your loan begins with you getting a NOC (No objection certificate) from your current lender. You need to submit these to the new lender. They will begin their due diligence with this and evaluate your credit score and also check the legal aspects of the property in question.
Once this is complete, the new lender will hand over the outstanding principal amount to the old lender. The old lender will transfer the house ownership papers to the new lender. For this process, there is usually a processing fee applied. This can be waived. There are however other minor costs which need to be paid like stamp duty charges, legal, valuation etc.