Things to Watch Out for Before Opting for a Home Loan Balance Transfer

The banks are free to fix their rates of interest on Home Loans and other loans. The Reserve Bank of India does not play a significant role in this except for the fact they decide the repo and the reverse repo rates. The banks have to follow the MCLR (marginal cost of funds based lending rate) based formula for determining the interest rates. Hence, you find frequent fluctuations with some strong banks capable of offering attractively low rates of interest.

A Home Loan is a long-term investment, usually spread over 30 years. Hence a difference in the rate of interest by 1% can result in substantial savings over the entire tenure of the loan. It is the principal reason why people Apply for Home Loan Balance Transfer (HLBT). This concept of the HLBT has become widespread today with many banks offering various concessions as they are in need of good customers as well.

Things to Watch Out for

You have decided to opt for the HLBT. Before you check out the Home Loan Balance Transfer deals, you should be ready with your documents. These are things you should watch out.

·         Your current Home Loan should be at least 12 months old. Banks like to see the statement of accounts that evidence your repayment for the previous 12 months.

·         There should be no default in the repayment. In case of a delay in the repayment of any instalment, you should be in a position to convince your prospective lender the reason for the delay.

·         If possible, have your sanction letter of the current Home Loan ready with you for reference.

·         Keep the copy of the Memorandum of Deposit (MOD) of Title Deeds ready with you for reference.

·         Apply for a certified copy of the title documents with the respective Sub-Registrar’s Office.

·         Have the photocopies of the original title deeds with you. Apply for the latest Encumbrance certificate from the Sub-Registrar’s Office.

·         Your new bank would like to verify your KYC. Hence, keep your KYC documents in order.

·         Your income is a vital constituent in the approval process. Keep the IT returns for the previous two years ready. A salaried employee should submit the salary slips for the last three months for verification of income. The bank would like to verify your statement of account where your employer credits your salary. Approach your bank and apply for the statement of account for the previous 12 months.

·         If you are a self-employed professional, you should submit bills or invoices as proof of income in addition to the statement of account, and IT returns. You might also have to prove the continuity of your income.

·         Check out your credit score from some of the credit bureaus such as CIBIL, Experian and so on. It plays a vital role in the loan approval. See if your other loans are in order. Keep your dues up to date to facilitate quicker processing.

Check out the best HLBT deals

·       Visit the site of MyMoneyMantra and compare the various home loan products of different banks on a single screen.

·       Check out your eligibility online. The banks will require the submission of the following additional documents.

Ø  The statement of your loan account for the previous 12 months

Ø  Letter from your current bank detailing the amount required to close the Home Loan by a particular future date.

Ø  List of documents you have submitted to them while creating an equitable mortgage with a certificate that the bank is holding them in their custody.

·  Apply for the HLBT with the bank you feel comfortable with

Points to remember

You have compared the rates of interest and chosen this particular bank for your HLBT. Understand that you will have to incur the following additional expenses.

·    The prospective lender will charge you processing fees (usually 1% of the loan amount plus GST)

·     The banks verify the title of the property to confirm that you are the actual owner of the property. They have advocates on their panel to do so. Some banks might ask you to pay the advocate fees separately. Similarly, the bank will also evaluate the property to check out its latest market value. They might ask you to pay the fees for the same as well.

·      On approval of the loan, you will have to approach your current lender and seek the release of the documents and cancellation of the MOD. You would have to bear the expenses for these formalities.

·      You have to offer the property as an equitable mortgage to your new lender. Specific states stipulate that you register the MOD in the records of the SRO. You have to pay stamp duty as well as registration charges separately.

In spite of incurring these charges, you will gain if the residual tenure is long and there is a difference of a minimum of 1% in the interest rate.

Also Read: How to Get an NOC from Your Housing Society for Availing a Home Loan Balance Transfer?

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