Refinancing a current
housing loan or / transferring the outstanding housing loan balance from one
lender (Bank or Housing Finance Company - HFC) to another is known as balance
transfer.
Effectively, the new
lender gives the old one the outstanding money on the loan. Once the balance
transfer is carried out, the liability & obligation of the borrower for
repaying the outstanding amount is towards the new lender.
A borrower may opt
for a balance transfer to avail of lower interest rates or better terms than
those of the existing loan, if the existing Bank or HFC is unwilling to offer
the same.
If he/she has a good
repayment track record, he/she is most likely to get a good deal on interest
rates with the new lender.
To effect a transfer,
one should get a foreclosure letter of consent, statement of account & list
of property documents from the existing Bank or / HFC.
Loan
Application...!
The borrower must
submit the home loan application to the new HFC or Bank.
The application along with supporting documents,
which include bank statement, repayment track record, foreclosure letter, &
list of property documents with the existing lender.
Top - up
Home Loan..!
The new lender assesses the property against
which the loan is to be sanctioned & might be willing to give a top-up loan
against the rise in the value of the property.
Prepayment penalty..!
Bank or HFC may charge a prepayment penalty,
especially if the loan is being transferred from one lender to another.
It is charged as some
percentage (may be 1 to 3%) of the total
outstanding loan. Some banks also impose a minimum period before allowing a
balance transfer.
Points to note....
Document
proof...!:
All photocopies of the supporting documents
must be self-attested.
Release of
documents..!
The existing lender
may not release the property documents before the home loan is repaid. The new
lender may be willing to release the payment against a letter from the current
lender giving details of the legal papers held by them and indicating the
number of days it will take to release the documents to the borrower.
Src: ET
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