17 AUGUST, 2022

Only homeowners with an ongoing Home Loan will understand how big of a commitment the EMI is. In fact, the huge interest being paid ends up constituting a considerable portion of the early-stage EMIs. A Home Loan EMI is a significant amount that eats into a chunk of your income each month. People who repay this borrowed amount feel the pinch and try to find ways of reducing sthe financial burden on them. They either try to prepay when they get a cash surplus like a bonus or hike or even consider a Home Loan Transfer. A Home Loan Transfer is essentially the process of transferring an existing Home Loan to another NBFC or bank to avail financial benefits. This opportunity is chosen when the borrower finds a lower interest rate and the services of the new bank more lucrative. One leverages this facility to bring down their monthly repayment amount.

Top banks have introduced Home Loan Transfer to empower the borrowers to repay the remaining loan amount at relatively lower rates of interest. The borrowers find this process extremely worthwhile as they get a chance to save some money and benefit from the other perks and add-on services offered by the new bank. A Home Loan Transfer is opted for to lower the repayment amount, save on interests, and benefit from the new terms and conditions relating to foreclosure, prepayment, late fees and penalties and more. In short, to make the Home Loan repayment easier on the pocket and more affordable.

Now one may feel that this is a seamless process, and all that is required from their end is to fill in a Home Loan Balance Transfer application form and calculate their savings using an easy Home Loan EMI calculator. However, there are a lot of intricacies involved. Undoubtedly, a Home Loan Transfer is associated with multiple benefits, but it is best to be well acquainted with the hurdles that may crop up during this process.

Here are a few things to keep in mind before going for a home balance transfer:

It is a tedious and cumbersome process.

The entire process associated with getting a Home Loan balance transferred to a new bank is quite cumbersome. It is almost as much as applying for a new loan. In fact, most people avoid the transfer to a different bank owing to the effort that goes into it. The process is quite extensive, starting from using a Home Loan EMI calculator to filling out application forms to collecting a pile of documents. The applicant should start by checking the terms and conditions of the new bank concerning the loan, knowing the transfer procedure thoroughly and knowing about the fees and charges that come with it. This is the point where someone with an ongoing Home Loan gets all clarity and should evaluate if the transfer is worth all the effort that is going into it.

No transfer of ownership to New Bank, which can lead to rejection

For the borrower, there are a host of benefits associated with moving the existing loan to a new bank. They avail a lower interest rate, better services and reduced monthly outflow. However, this is a one-sided risk for the new bank, and the discretion to accept or reject lies with them. This is because the ownership is not being transferred; only the Home Loan is moving from one bank to another for more attractive benefits. This process is insignificant for the new bank in question.

The current bank can create issues.

In one odd rare case, the NBFC or bank about to lose a customer may create a hindrance to delay the transfer. Getting a no-objection certificate from the existing bank is compulsory for the transfer to be executed, without which the borrower is stuck.

New banks may levy additional fees.

For the new bank, the Home Loan Transfer is a fresh loan application. Apart from going through the entire tedious application procedure, a fresh processing fee may also be necessary. This fee varies between 0.5% to 1% on the outstanding loan amount. This fee must be factored in when calculating the financial benefit of opting for a Home Loan Transfer. If the savings are not considerable after taking this fee into account, it may not be advisable to opt for this transfer.

The overall procedure is complex.

The borrower needs to get a clean chit from the current lender to get things rolling. This would involve clearing all pending payments to them, the bank verifying the payment records and then issuing a No Objection Certificate. The new bank requires this document to kickstart the due diligence, and the transfer is treated like a fresh loan application. The new bank may sometimes require the co-owner’s consent, and if the person is in another country or unavailable, it could stall the process. The borrower will go through the entire loan approval process, which encompasses associated fees, location, loan amount, credit score, loan type, loan term and the applicant's age. The younger the applicant, the more they can benefit in terms of tenure and a hassle-free switch.

Keeping all the hurdles in mind, one must definitely consider transferring the loan balance if they are paying a huge interest rate and want to make their EMIs more reasonable. For those with a good repayment track record, a Home Loan Transfer is hassle-free and straightforward. Whenever you decide to switch to another bank, check a few things other than reduced EMIs and lower interest rates. The bank you transfer your Home Loan to should have favourable terms and conditions regarding foreclosures, allowing prepayments and minimizing penalties in case of EMI repayment delays due to unfortunate circumstances.

The benefits of a Home Loan balance transfer outweigh its hurdles. At Kotak Mahindra Bank, we offer a Home Loan Transfer facility at low-interest rates starting from 7.50% for a tenure of up to 20 years. Transferring your home to Kotak Mahindra Bank can help reduce your EMIs and save on interest.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.