Borrowers are feeling the heat as banks and other lenders are increasing interest rates on loans from May 2022.
“Recent borrowers who have taken home loans The most impact will be felt before April as rates are expected to rise from 6.5 – 7% to around 8%. For example, if you have already taken a home loan of Rs 30 lakh at 7% for a tenure of 20 years, your EMI will increase from Rs 23259 to Rs 25093, if the home loan interest rate increases, So this is a jump of Rs 1834. 7% to 8%,” says Pranjal Kamra, CEO, Finology Ventures, a fintech startup.
Kamra suggests that to mitigate the impact of this rate hike, existing borrowers can use techniques such as balance transfer or prepayment options to reduce their loan burden.
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If you are finding it difficult to repay your home loan EMIs due to rising interest rates, it may be a good idea to transfer the balance to a lender with competitive home loan interest rates. However, one must analyze the advantages and disadvantages and calculate the additional savings that result from choosing a home loan balance transfer.
What is Home Loan Balance Transfer?
Transfer of home loan balance from existing lender to new lender is known as home loan balance transfer. Simply put, whether you call it switching, balance transfer or just transfer, it is a loan being taken by another lender to the old lender in full payment, after which the borrower will start paying Equated Monthly Installments (EMIs) . ) to the new lender. This is mostly done by a borrower to avail loans with lower interest rates or better terms and conditions.
If you are planning to transfer your home loan to another bank, here is how to do it.
Foreclosure of Existing Debt
The first thing you need to do to apply for foreclosure is obtain a statement of account and list of property documents from your existing lender. If the old lender does not release the property documents, the new lender can release the payment against a letter from the former, including the legal papers held by them and the number of days it will take to release the documents after the loan. compromise.
How to transfer home loan balance?
According to the website, these are the steps to transfer the home loan balance.
Make an application to your current lender
Inform your lender that you want a balance transfer through a letter or a form, listing your reasons carefully.
collect no objection certificate
Your lender will get back to you with an NOC or consent letter and your new lender will require it when you file your application.
submit your documents
Contact your new lender and hand over all your documents. Apart from submitting the required documents like NOC and KYC documents, you may also need to submit a copy of your property papers, loan balance, and interest details, and a filled application form.
Get confirmation from old lender
After submitting all your documents to your new lender, wait for the final confirmation from your old lender regarding the closure of your loan account. It certifies that the loan contract has expired, as are the terms governing it.
Pay all charges involved and start anew
Sign a contract with your new lender and pay the due fees. Once this is done, you can pay your next month’s EMI to your new lender.
Documents required for transfer
according to
The website requires the following documents from your current lender:
- List of original documents kept in the bank
- Loan account statement for the last one year
- acceptance letter
- interim period security
new loan agreement
Once approved, a new loan agreement is executed between the borrower and the new lender. The new lender will issue a check in favor of the old lender equal to the amount owed.
processing charge
Check the processing fee (which is usually up to 1% of the loan amount). A lender or bank can sometimes reduce or waive the processing fee if your credit score—which represents your credit history and creditworthiness—is acceptable or if they are running a special promotion for a limited time.
When should you consider home loan balance transfer?
Home loan borrowers should note that the benefits of transferring a mortgage should outweigh the costs. According to experts, if you are planning to transfer your balance, the interest rate difference between the two lenders should be at least 50 basis points. Also, consider fees and penalties when seeking balance transfers.