How to Switch your Home Loan for a Better Interest Rate - Home Loan Blog - Tata Capital

Follow these steps After you Switch your Home Loan

Mar 08, 2017

Once you have taken a home loan, your work is not done. And no, we are not just talking about servicing your EMIs.

Banks regularly update their borrowing rates and its possible that your existing loan might be charging you higher rate of interest when compared with other offers you would have from other lenders. So it might then be in your interest to consider transferring your loan to another lender offering lower rates.

But only a lower rate of interest should not be the sole criteria for transferring your home loan. There are several other factors to consider.

First of all, you need to check the foreclosure charges with your existing lender. The new lender might have his own set of stricter home loan eligibility criterias. So whether or not you are eligible for loan from new lender is also a point to evaluate. Then there are additional charges like processing fees, legal charges, stamp duties, valuation fee, etc. that the new lender might charge. It's once you take into account all these factors alongwith, benefit comparison of reduced interest outgo (due to lower interest rate) that you will get the full picture and its impact on your financial life.

Now once you have decided to shift your loan, following steps need to be taken:

  • Submit an application to your current lender requesting for transfer of loan to another lender. The lender will then provide a NOC alongwith a statement of your outstanding loan amount.
  • Submit these documents alongwith complete application to the lender you wish to transfer the loan. Once the due diligence (which includes credit appraisals, legal verification of property, technical evaluation, etc.) is completed, the application will be rejected or approved. If approved, the loan amount will be sanctioned for closure of existing loan account.
  • The original property papers will then have to be handed over to the new bank and you will continue with your new EMI (due to reduced interest rates) and new lender.