5 Things To Do Before You Transfer Your Home Loan to Another Bank

The banks are competing to offer the best of interest rates to home loan seekers, as the Reserve Bank of India (RBI) Governor Raghuram Rajan urges the banks to cut interest rates following the cut in repo rate. But, if your bank or finance company is not passing on the benefit of lower interest rate to your home loan, it is time to shift the loan to a better bank. Before you transfer your home loan, PropGuide shares a list of things you could do:

• Research for good offers from banks
  Though not all but a few banks have reduced the interest rates for general as well as home loans. Read and research about all the banks including co-operative banks for the best rate. Also, go and meet the bankers at the nearest branch and check if they have any ongoing or upcoming home loan offers or schemes. Many loan seekers get the best interest rate deals during such home loan melas.

• Calculate the EMI outflow after charges
  The rate of interest of the new bank might be much lower than what you are currently paying. But is it low enough after considering loan processing fees by the new bank and the loan transfer charges of the old bank? Sometimes, the transfer charges can be as high as Rs 10,000 for a loan amount of Rs 8 lakh. Calculate how many months will it take for you to make up for these charges? Ideally, you should be able to get advantage of it within a year. If it takes longer than that, it might not be wise to shift banks as interest rates can change affect the equated monthly income (EMI) outflow yet again on floating rates. Banks generally tend to sell insurance along with new loans, calculate their charges as well.

• Bargain with your current bank/finance company
  Speak to the loan officer of the old bank before you shift your loan. If you have a good credit record, the bank would put across a better offer rather than lose a good customer. If they are willing to give an offer, bargain well and hard to get a better rate than what you would be shifting to. Staying with the old bank might save a lot of time and effort. Negotiate for the tenure of the loan as well as reduced EMI depending on your priority.

• Get your documentation ready
  Banks require as much documentation including deeds of the property, identifications and credit history as before issuing the new loan. Make sure you have all the documentation in place. A few banks also calculate the depreciation value of the asset as well. However, if you are willing to pre-pay a part of the loan, the new bankers might be able to give you better rate.

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)