For a prospective home loan seeker, the interest rate on loan is the biggest matter of concern. The interest rate on home loans varies according to the banks. It is anywhere in between 9.8{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} to 12{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616}. A home loan bank transfer helps you shift the existing home loan to another bank that offers a lesser rate on interest.

It is not always the interest rate that dictates a home loan transfer; it could also be due to better services and offers. Such transfers are applicable if the customer has paid the EMI for more than 12 months with the existing bank.

The Prime Features of a Home Loan Bank transfer

• Hassle free transfer of the outstanding home loan amount from one bank to another
• The home loan borrower has to pay a fee to the new lender, and it is usually up to 1{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the loan transferred
• The transfer of the home loan can be availed only after a given period, the details of which are mentioned in the original loan document
• After the transfer, the loan borrower owes the new bank or lender the principal loan amount that was transferred plus the charges applicable

The Common Scenarios for a home loan transfer

Apart from the reduction in interest rates, there are other reasons why a borrower would want to change his lender.

• If the current lender does not agree to negotiations on some of the terms and conditions
• If the lender is not open to a loan top-up
• If the borrower is not happy with the services of the current bank

Fee calculation

Loan transfers are beneficial if the borrower is in the early stages of the home loan. For a transfer, the banks charge anywhere from 0.5{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} to 1{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} as the processing fee. Sometimes the fee is a flat amount of Rs. 5,000 to Rs. 10,000.

To calculate the efficiency of a bank transfer, reduce 100 basis points if the tenure left for the loan is less than five years. Likewise, a reduction of 75 basis points should be carried out if the tenure of the loan is five to ten years and 25 to 50 basis points for 15 to 20 years.

The Process

A letter should be submitted to the existing lender asking for a loan transfer. The bank will issue an NOC or a consent letter and a statement of the outstanding amount. Once these documents are provided to the new lender, the loan will get sanctioned, and the account closure with the old bank will be initiated.

Once the transaction is complete, the new lender will get hold of the property documents, and the post-dated cheques will be cancelled.

The prepayment penalty (2 to 5{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the outstanding loan amount) that was charged by the existing lender is now waived by some banks. This can be negotiated if the bank charges the same.

Points to consider before a loan transfer

1. Reduced EMI and a longer tenure need not necessarily mean you will be paying a lesser amount. Carefully calculate the total outflow and compare the rates of both the bank before making the decision.
2. Apart from the processing fee, the borrower will also have to pay valuation fee, stamp duty, legal charges and technical fees as well as other combined charges. Compare these costs and analyse if the reduced interest rate makes a difference.

iii.    The terms and conditions that dictate the loan of both the banks should be investigated. Examine the pros and cons of the terms and conditions before arriving at a decision. Some banks may require the borrower to open a savings account. Such subtle conditions must be analysed

1. A transfer can be avoided if the interest rate is only marginally better.

Most of the banks in India offer the facility to transfer the existing home loan to another bank. A home loan transfer can help you plan your finances better.

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