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 )
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