Transferring Your Home Loan? Get These 10 Things Right!
The mortgage lender market is now bigger than ever before, with countless avenues available to you when looking for a Home Loan. While a high degree of competition is always in the interest of the borrower, it can also be very overwhelming in terms of the vast amount of information and options available to you. A major part of the mortgage market today is the balance transfer, which is an attractive option for many borrowers, given the money you could stand to save by transferring your loan to a lender offering better interest rates.
Before you begin transfer proceedings, it is important for you to check your CIBIL score once again, get the required documents for balance transfer ready and check the eligibility criteria of your new lender. Once you have sorted all this out, you can begin.
Since a Home Loan balance transfer has grown in popularity, many lenders are taking steps to make it very difficult for you to transfer your Home Loan either by charging a barrage of Home Loan transfer charges or enforcing tiresome policies. Listed below are some of the most common measures taken by lenders who are looking to make a Home Loan balance transfer a cumbersome process:
1) Foreclosure Letter
This is a letter you need to get from your existing lender when you’re looking to transfer to a new lender, which essentially outlines the outstanding principal amount of the Home Loan that’s still to be paid off. While earlier it was fairly straightforward to get this from your existing lender, nowadays lenders can make you jump through various hoops such as pushing you towards their sales department who then attempt to retain you, before they even entertain the idea of issuing the letter. It is important therefore that if you are sure about your decision to switch lenders, you make it clear upfront that you aren’t interested in going through their retention teams.
2) List of Documents (LOD)
This is a list of all the original paperwork about your loan and property, which is held by your existing lender and needs to be given to your new lender. This is a further formality that many lenders enjoy making difficult by issuing previously unknown charges. As soon as you decide to go in for a transfer be sure to clarify the process and policies to get your LOD back.
3) Penalty Charges
A further charge popularly levied by lenders to try and deter Home Loan balance transfers, penalty charges can often spring up at the last moment. These can include document issuance fees, cheque swapping fees and many more. Be sure to clarify the entire transfer process and Home Loan balance transfer charges well beforehand so you are not caught off guard with any hefty fees.
4) Interest Calculation
Be sure to clarify exactly how the interest payment will work when switching lenders. This transfer will formally take place on a given date and it’s important you know exactly how your interest will be charged by your existing lender till the switching date. This is because many lenders charge interest a month in advance, so be sure you’re not overcharged and are only paying interest up until the date you switch.
5) Delayed Processing
An additional way you could lose out by paying more interest than you should is when your current lender takes its own time in processing your transfer and going through all the required formalities. This lag could mean squeezing further interest payments from you, so you should try and ensure that you get clear timelines from them upfront.
6) Collecting Paperwork
Some lenders have stringent policies in place for document collection of originals so be sure to ask them well in advance what their procedure is so it doesn’t cause any unexpected delays to your balance transfer application. Though this may sound trivial, administration issues like this occur a dime a dozen times in banking, and you must be sure to ask the right questions to pre-empt this.
Many people get stuck in a loop after requesting a balance transfer. When they first request a transfer over the phone, they may be passed off to other agents or asked to go in branch. What you will often experience is essentially getting bounced back and forth between agents without anyone keeping a record or processing the request. So make sure your transfer is taken seriously with a proper record of the request being produced by whomever you talk to.
8) Further Fees
Given the fact that your new lender will treat your transfer application as a fresh loan, you may have to pay a whole new set of processing fees, stamp duty and other such Home Loan transfer charges. Make sure you calculate these before deciding on a transfer.
9) Loan Tenure
Saving money by opting for a lender with a lower rate can only save you a significant amount of money if you have a long tenure left on your loan. If you have only a few years to go for your tenor, you must be sure to compare the amount you stand to save against all the various processing fees to ensure that it’s worth the effort.
10) Communication Issues
You could find yourself in a situation where you are trapped between your current and future lender. To transfer to the new lender, the old lender will only release your documents when they get the cheque for the balance principal amount and the new lender will release the funds after all required documents for balance transfer are submitted to them. To avoid this, be sure to insist on a meeting between both parties to come to fitting solution so you can enjoy the lower rates sooner.
In the end, a timely Home Loan balance transfer comes down to you being aware and organised. Think ahead and start all conversations of switching your Home Loan early on so you’re not caught off guard and are well aware of all charges, policies and payments to have a smooth transition. With that in mind, think about transferring your Home Loan to a lender who prides itself on minimising all hassles whilst offering competitive rates such as Bajaj Finserv.
You can get an indication on how much you could saving using the Home Loan emi calculator and read about the various benefits of switching to a Home Loan with Bajaj Finserv such as customised repayment schedule, 3 EMI holiday, etc.