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2 Important Things You Need To Know About Home Loan Balance Transfer
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A home loan balance transfer is usually done to allow the borrower to take advantage of lower interest rates in the market. Many times, borrowers during the tenure of the loan are not able to afford the interest being charged. In such cases one can simply apply for a loan transfer to a financial institution that offers a more affordable interest rate. Not only does this make payment of EMIs on time easy, but also allows one to save up by paying a lower interest rate. One can also use this transfer as an opportunity to renegotiate the terms of the home loan to benefit the borrower. If you are planning on getting a home loan balance transfer, there are two things one needs to be aware of:
The first thing an individual must do is write a letter to the existing lender requesting a home loan transfer. After the financial institution considers your request, they will provide a NOC which is also called a consent letter. This document allows the borrower to get their home loan balance transfer and also states the outstanding amount the borrower is yet to pay. This document will be required by the financial institution where the borrower plans to transfer his loan to. The financial institution will then send all the related property documents to the new lender to finalize the transfer of the home loan balance. The interest rate which the new lender will provide is based on the current interest rate which is charged to all home loan applicants.
One thing that the borrower must check up on is whether or not their financial institution charges a prepayment penalty. This penalty usually requires the borrower to pay 2 to 5 percent of the outstanding loan amount to the old financial institution. However there are a few financial institutions which do not charge this penalty to their borrowers. Before applying for a home loan balance transfer, if it crucial for the borrower to find out whether they will be required to pay a prepayment penalty to their financial institutions. In the case of a home loan which has a floating interest rate, the RBI mandate can help you negotiate with the financial institution to waive the penalty off.
If you are planning on getting a home loan balance transfer, the best time to do so would be early into the tenure of the loan. This will allow you to save up and benefit more from the transfer of the loan. During the transfer, the borrower must ensure that their old financial institution sends all the documentation to the new lender on time. This will help reduce any hassles and ensure that the transfer is successful.
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