Want to shift your home loan to another bank?
First, research the market well on interest rates. Some banks charge a
different interest rate if the loan amount is less than Rs 25 lakh or Rs
30 lakh. So check if you have got it right on that parameter. Next,
speak to your present bank about your intentions to port the loan. Some
banks allow a concession in interest rates on payment of a small fee
known as the conversion fee. This conversion fee is usually equal to the
processing fee charged by other banks. Hence, you may be better off
staying with your present bank if the revised interest rate offered by
your present bank is the same as the one offered by the new bank.
The other factors to keep in mind include:
Prepayment charges
Floating rate home loans no longer carry a prepayment charge when you
shift the loan from one bank to another. However, this rule is not
compulsory in the case of fixed rate home loans. Hence, check from your
current bank if you will be charged a prepayment fee. This can be a
substantial amount.
Other fees and charges
When you shift your home loan, the new bank will charge you processing
fees when you open the loan. This is either a percentage of your
outstanding loan, or is a flat amount. You will also be required to pay
stamp duty on the loan you take, along with franking and notarisation
charges. Some banks require you to insure your house against fire, and
in such a case you must factor in fire insurance premium as well. When
you add all these charges, it will work out to 0.5 per cent -0.75 per
cent of the home loan amount, which can be quite significant . It is
always advisable to be clear about these details from the new bank
before you start the process.
Documentation
The bank you intend shifting the home loan to will require a complete
Know-Your-Customer documentation, even though it is simply a balance
transfer. You should also submit all your property documents. Although
some banks waive the requirement to submit income documents and bank
statements if you have been servicing your loan regularly in your old
bank, some other banks ask for these documents also. You should submit
the loan statement from your old bank as well, to demonstrate the
regularity in payments.
Payment of interest
Sometimes the new bank gives you the cheque 2 days after disbursing the
loan, but will charge interest from the date of disbursal. This means
you may have to pay interest to both the banks for 2 days. Remember to
clarify this with the new bank before you begin the loan shifting
process and ask them to charge interest only from the date you are given
the cheque. Also keep in mind that on the receipt of the cheque from
the new bank, you must immediately submit this to your current bank,
sign the loan closure form and place a request for the release of the
property documents. Only when the cheque for the outstanding amount is
received, will your present bank immediately stops charging interest.
(The writer is CEO, BankBazaar.com )
