Why Transferring Home Loans Appears Problematic To Homebuyers?

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Transferring home loan from one bank to another for better facilities and lower interest rates is attractive option for existing home loan borrowers. However, this entire process of transferring includes several charges and suits that the applicant should be aware of. Unsatisfied loan borrowers generally opt for this switching. Usually they have a ‘plan-B’, in case they are not happy with their existing banking services, besides the dearth in services and inflexible renegotiation terms of the lender such as – changing the tenure or reworking the EMI, also influence a buyer to shift their ongoing loan repayment tenure to any other lender with better facilities.

Previously, banks wouldn’t allow home loan interest rate cuts to the existing borrowers. Passing on the same benefit will definitely benefit the customers with better loan savings during repayment tenure. If banks make it happen, then transferring home loans will be benign.

In your home loan tenure you actually end up paying greater amount in installment more than the actual purchased price of the property. In case you decide you renovate the property within this due period, in most of the cases getting a renovation loan becomes tough as most of the lenders don’t grant an increased loan amount for this purpose. Generally under these circumstances borrowers tend to transfer the loan cycle to another bank with better services and go through several complicated processes.

Tiresome process
For transferring home loan at first the borrower has to submit application to the existing lender. Then the bank will provide the consent letter or the NOC along with the details of the outstanding amount. All these documents are needed to be served before the other bank in which the borrower wants to shift the loan.

The other bank will process it as a fresh loan approval request and process the documentation accordingly. The documentation process includes submission of the employer’s letter, salary slip, photo ID proof, bank statement etc. That means one has to redo the process from the very beginning. Transferring home loan requires thorough documentation, coordination and following up. There will be problems, if the existing loan is jointly taken or the income levels have declined. Being irregular in paying EMIs can cause application rejection too. After total satisfaction of documentation the new bank will approve the application and will ask the previous bank to close the existing account.

Hanging risk involvement for the new bank
Once the transaction is completed and the property papers are handed over to the new bank, then the remaining post-dated cheques or ECS get cancelled. The new bank then runs an open-ended risk because the existing bank releases the mortgaged documents of the property only after receiving the payment. The bank takes such risk just to grab new customers. As the new bank treats this application as a fresh loan approval process, therefore it asks the borrowers to pay the processing fee, stamp duty, notarisation charges and franking charges which is equivalent to 0.5%- 1% of the loan amount.

An indefinite process
A home loan transfer process doesn’t have any property route. No actions can be taken legally against the bank, if it doesn’t allow for the transfer. Thus, mostly borrowers prefer to stick to their existing borrower to avoid further litigations.

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