What are the problems faced by borrowers while transferring home loan?

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RE: What are the problems faced by borrowers while transferring home loan?

Home buying is a life changing moment for people. Those who cannot afford by their own finances, people seek a home loan to buy their own home. While seeking home loan from banks, personnel lure home buyers by offering certain discount and promise of best rate of interest.

As time proceeds and policy changes related to home loan, then problem actually starts between the bank and home loan borrower. Home loan borrower tries to renegotiate on terms and EMIs amount, sometimes they are unable to reach to common ground to resolve the issues. In that case, borrower opts for home loan transfer facility to another bank with low rate of interest. The process of transferring a home loan from the present bank to another bank which offers a lower rate of interest is called a home loan transfer. There are certain eligibility criteria to meet to opt for a home loan transfer facility like your home loan if you have regularly paid a minimum of 6-12 month EMIs.

The major problem faced by borrowers while transferring home loan are:

  • Undergo a complex process – While opting for home loan transfer, the borrower needs to submit a fresh home loan application along with the consent or NOC letter from previous bank with a document mentioning the outstanding amount. The borrower will submit these applications and documents to a new bank of his/her choice. The new bank will treat this application as a new home loan applicant and follow all due process related to home loan disbursement. The new bank will seek all necessary documents from borrower like an employer’s letter, salary slip, photo identity proof, bank statement, etc.
  • Cost of transfer – For transferring from your existing bank to new banks, the borrower has to pay fresh charges  like processing fee, stamp duty, notarization charges, and franking charges. These charges cumulatively will be around 0.5 – 0.75% of the loan amount.
  • Conversion fee – Amidst high frequency of home loan transfer, same bank also started offering an option to change to the new rates within the same bank by paying a switch fee or conversion fee. This could be around 0.5 – 1% of the outstanding loan amount. Generally, this option is not actively being offered by banks and not all bank offers this too.





Answered on July 29, 2020.
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