Why do borrowers transfer a home loan from one bank to another?

An expanding number of borrowers are changing their home loans to more financially approved banks. It has been declared that there has been a 20 percent hike in transferring of home loans as revealed by the Economic Times. The switching of home loans means that the old lender pays off the old debts and then starts making EMI payments for the new debts.

Why do borrowers transfer a home loan?

People applying for home loans do often transfer a home loan from a higher interest rate to a lower interest rate to make subsequent savings. Applying a higher rate of interest especially for home loans is not a good option. Thus people tend to change the lender to opt for a lower rate of interest. During the tenure of loans the savings rate increase for the debtor and thus it reduces the financial pressure.

MCLR

It is now proclaimed that all interest rates upon home loans are now completely based on the bank’s marginal cost and not the base rate of the bank. People may start opting for home loans from other non-financial institutes. However, in case, the interest is the socialist one and thus they may vary the interest rate as they don’t follow the concept of MCLR.

MCLR linked home loans 

If your bank is offering a higher rate of interest in home loans you must look for a lower interest rate. In no way, the existing bank is allowed to charge the repayment of the loans. It will be a better option if you choose banks whose interest rates are quite linked with MCLR.

Convert base rate to MCLR

The customers whose loans are solely under the base rate of the bank are further acclaimed to change it to MCLR. The borrowers whose loans are transfixed to the base rate can convert it to the MCLR mode. But customers can continue with the base rate if the loan is near to an end. If the difference between the MCLR and the base rate is high then it’s better for borrowers to convert their loans to MCLR. MCLR is best with banks offering lower interest rates. 

Why transfer

Lenders with their interest in the base rate can transfer their loans to banks with MCLR. It is far easy and helps in automatic transformation. It can be done by a single fee payment and signing some legitimate documents.

Things you should consider 

Timing

The customer should be evaluating the timing of their loans. Within the early tenure of the loan period, it should be done. The biggest thing you should consider before choosing is that it shall offer a lower rate of interest. Repayments get less in cost if the loan is transferred in its earliest period. 

Miscellaneous fees

You should go thoroughly through the processing fee and other charges. By well maintaining the stamp duties and the legal fees it is to be done. These are the fees that cost much more than the actual valuation of the loan amount.

Terms and conditions

Evaluate the terms and conditions well. It is often in the case that while transferring the loan amount the borrowers find it can be processed accordingly. The terms and the conditions are a narrow trap mostly for the customers who think transferring their loans to another bank is quite suitable.

Documentation 

The steps involved are also documentation. Taking proper documents at the right time also helps in re-fixing the loan amount. Improper documentation leads to the misreading of the loan amounts and thus creates a lot of trouble.

How does balance transfer help? 


Lower interest rates 

It’s less risky as a property is provided in the form of mortgages. It helps in availing for lower interest rates which are at all profitable for the lender. It also helps the lender summing up his savings. 

Ensures pre-payment

 The best mode of home loan transfer is that it ensures loan pre-payment and doesn’t block it. A lot of borrowers have this question in mind, does loan pre-payment get blocked. It gets ensured so the answer is no.

No complications

Applying for a home loan from one bank to another bank is quite an effortless job as it seeks no paperwork. Therefore it reduces the tension of documentation and more prominently there’s no confusion in it.

Induces savings

As with the help of the MCLR loans the rate of interest decreases and the tenure to repay also increases. Thus it helps the borrowers to induce their savings quite a bit.

Thus with these banks making advancements in technology home loan transfer is not a difficult job. While opting for a home loan you should consider a lot of things. Most prominently borrowers should go for lower interest rates and MCLR. Like the right paperwork, the right documentation is very much needed.