How to transfer your home loan to a cheaper lender?

Updated: Monday, May 13, 2013, 10:38 [IST]

It's highly possible that you have taken a home loan and now wish to change the lender, as interest rates are cheaper elsewhere.

For example, State Bank of India is currently offering the cheapest home loans in India at a current rate of 9.95 per cent. Now, a small difference in interest can mean a lot when it comes to a home loan, since we are talking of significantly huge amounts. Also read comparison of the cheapest home loans in India

How do you transfer your home loan?

One should begin the process by submitting a letter to the existing lender requesting a loan transfer. The lender will then consider your request and will give you consent letter or no objection certificate (NOC) along with a statement mentioning the outstanding amount.

You have to take the statement to the new lender who would then study the documents. The new lender will then sanction the amount and the old lender will close your account. Once the transaction is over, your property documents will be handed over to the new lender, the remaining post-dated cheques/ECS will be cancelled.

The bank or housing finance institution will then offer you loans on their existing rates. Remember, that if it's a floating rate of interest, then the new lender could hike his rates and your EMIs could rise again.

Also remember that you would have to pay the processing fee once again. Processing fees are generally around 0.50 per cent of the loan value, with State Bank of India currently lower then that.

It's also important to remember that if you switch your loan after most of the interest has been paid, it will make very little sense to shift the loan.

Pertinently, going in for a new home loan lender means getting involved in all the processes once again from credit appraisal, legal verification of property documents and technical evaluation. So, go for it, if the interest rate differential is high.

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