Things to Consider Before Transferring Home Loan

If you are a home loan borrower, you must have seen other banks asking you to transfer your loan to them to gain benefits such as Longer Tenure, Lower Home Loan EMI, lower Home Loan Interest Rates etc. Transferring home loans means that the pending loan amount that you have with one bank will be transferred to another bank. In this case, you will be repaying the pending amount and continuing your loan with the new bank.

Transferring home loan from one bank to another is not a bad idea, but borrowers must be aware of all the pros and cons related to it. Home loan borrowers should take into consideration different factors before they decide to transfer their loan to another lender.

Things to Consider:

• Total Outflow – You should calculate the total loan amount that you have to pay back to the bank before you decide to transfer your home loan. Calculating the total outflow will help you compare the difference between the repayment amounts of your current and new banks. The new bank may reduce your EMI by increasing the tenure, but you must remember that in this case interest will keep adding on your outstanding amount. It is advisable to increase your EMI amount and clear off your loan sooner to save money on interest. If you are already paying a higher EMI to your current bank and are not struggling for cash, then you might not want to transfer your loan.

• Charges – If you take a home loan, you will have to pay various charges besides interest such as processing fee, legal charges, stamp duty, etc., to your lender. Before deciding to transfer your home loan to another lender, you must take into consideration all the charges (including interest) of the new lender and compare them with the charges of your current lender. Some banks charge a percentage of the loan amount as processing fee, some have a fixed amount while there are others whose processing fees is dependent on the occupation of the applicants. Also, if your current bank finds out that you are transferring your loan to another bank, it might increase the closure charges.

• Collateral Security – If you had provided a collateral security to your current bank while taking the home loan and have already repaid a huge part of your loan, then do not offer the complete collateral again to the new bank. It does not make sense to offer a collateral, the value of which is double your pending loan amount. You should offer a lower amount as collateral or ask the new bank to lower down the interest rate.

• Loan Terms and Conditions – Before you sign any loan agreement, you must read the terms and conditions of that particular loan. In case of loan transfer, you should read and compare the terms of both the banks to understand the pros and cons.

• Allied Account – Banks generally ask their borrowers to open a savings account with them when they apply for a loan. If the bank to which you wish to transfer your loan asks you to open a new account with it, then you should first find out the benefits and charges of that account. Also, if you use the current account of your current lender for all your banking needs, then you would be their premium customer. Premium customers enjoy extra benefits and services are provided to them quickly by banks. You should think carefully if you really want to lose this comfort and switch your loan to a new bank or stay with your current bank.

• Other Offers – Some banks try to attract customers by offering them extra benefits along with home loans such as credit card, insurance, etc. Before agreeing to transfer your Home Loan to another bank to avail such offers, you must consider if you even need them or not. Also, you must read the terms and conditions of such offers before accepting them.

These are some of the things that you must consider before transferring your home loan to another bank. Do not get attracted by offers such as low interest rate, free credit cards, insurance, etc., easily. Research well and choose wisely.

What are the eligibility conditions for a home loan?

Home Loans are generally given to three categories of individuals by banks - salaried individuals, self employed professionals and self employed non professionals. The eligibility conditions vary for these three categories in most banks. The repayment capacity and eligibility of the borrower is determined based on several factors like age, tenure of loan, income, employment type and status, spouse's income, stability and continuity of occupation etc.

Let’s look at the main eligibility conditions:

Age of Borrower: Banks prescribe a minimum and maximum age of the borrower. The minimum age is usually 21 years of age. The age of the co-applicant is also specified by banks. The maximum age is given in terms of the age of the borrower at the time the loan ends. So while ICICI specifies this to be 65 years of age or retirement age, Axis Bank is more stringent for salaried borrowers at 60 years on loan maturity. Self employed individuals and professionals in Axis Bank have the maximum age at loan expiry criteria to be 65 years. Some banks like HSBC give different age limits for salaried individuals in private companies, government companies and self employed individuals.

Employment: Generally, all borrowers are expected to be either salaried with private or government companies, self employed professionals or self employed non professionals. As a home loan is a large liability, banks would want to make sure of the stability and continuity of employment while granting the loan. It is for this reason that in some cases, the eligible loan amount is lower, as the job may be viewed to be more risky compared to others.

Income criteria: Banks determine eligibility criteria based on the income of the individual. Although many public sector and private sector banks do not specify this amount in black and white, some banks like HSBC do so. For example, HSBC has minimum net income criteria of Rs. 5 lakhs per annum for salaried borrowers and Rs. 7.5 lakhs per annum for self employed borrowers. Some banks look at income on gross basis, while others consider the net take home salary for determining eligibility.

Spouse’s income: Most often, borrowers take a joint home loan along with the spouse to enhance loan eligibility. Banks also suggest this option. In this case, both the applicants’ incomes are considered. As the income base is increased, the repayment capacity is higher and therefore the amount of loan you are eligible to borrow increases.

Other loan commitments: When you borrow a home loan, the repayment capacity is of paramount concern for the bank. Therefore, the loan eligibility is worked out by calculating backwards on the Equated Monthly Installment (EMI) amount. This is compared with your monthly outflows, most important of which are payment of other loan commitments like car loan, education loan, etc. and the ability to pay is determined. This is a major determinant of the loan eligibility.

Other factors: Banks have internal stipulations on minimum and maximum loan amount, maximum tenure etc. Although these do not determine your eligibility directly, they have an indirect effect. For instance, the tenure you choose will determine your EMI, which in turn will be checked to determine the repayment capacity and hence the eligible loan amount.

BankBazaar.com online eligibility calculator can be used to check the eligibility for a home loan. This calculator would ask for details such as the monthly income, current loan obligations, loan tenure, interest rate, age of borrower and employment type, based on which the borrower’s loan eligibility is calculated and given instantly.

Ever Reliable Banks with Impressive Home Loan Interest Rates and Advantage for Home Owners

Buying a home is once in a lifetime opportunity for a large majority of people. Due to easy availability of home loans, a vast majority of people have finally cherished their long pending dream of owning a house. While home loans are now a common financial instrument offered by virtually all private and public sector banks, some banks continue to be the proffered choice amongst users due to their easy loan approval process, lower interest rates and no hidden charges. A home loan applicant is recommended to always compare home loan quotes from multiple banks before selecting the best suitable bank for his or her home loan. Let us look at some of the reliable and popular banks with impressive home loan interest rates and an overall positive track record.

Five Reliable and Popular Home Loan Banks: 

Public sector banks are largely preferred when it comes to home loans as they offer slightly lower rate of interest. However the slow approval rate and sluggish nature of work in public sector banks usually make people embrace Non-banking financial companies and popular private sector banks who are known for their quick loan approval process and professional dealing. Here is a list of the top five reliance banks and non banking financial companies that users prefer when it comes to applying for home loans.

State Bank of India: 

State Bank of India popularly known as the SBI is the largest public sector bank of the country and one of the popular banks when it comes to home loans. Although the heavy rush of home loan applications and slow loan approval system can sometimes mean a longer waiting period for loan approval, lucrative interest rates makes SBI a popular choice with home loan borrowers. State Bank of India charges a minimal processing fee of Rs 1000 or 0.25% of the loan amount for loans up to Rs. 2 Lakhs. For loans between Rs. 25 Lakhs to Rs. 75 Lakhs, the bank charges a flat processing fee of Rs 6500. Loans higher than Rs. 75 Lakhs come with a loan processing fee of Rs. 10,000.

LIC Housing Finance: 

If any non banking financial company comes close to public sector banks in terms of home loan popularity, LIC Housing Finance tops the list. One of the unique advantages of LIC Housing Finance is the option of having a fixed interest rate for a period of five years. LIC Housing Finance offers a discount of 0.25% on home loan interest rates in case the borrower has an insurance or investment policy with LIC more than Rs 15 Lakhs.

Axis Bank:

Axis Bank is a popular choice for home loans due to its zero pre payment charges and quick loan approval mechanism. Axis Bank also charges quite competitive loan processing charges which are up 1% of the total loan amount of a minimum of Rs. 10,000.

HDFC Bank: 

HDFC bank is a popular choice for home loans for private sector banks. HDFC bank has been a pioneer in the home loan market and has active tie ups with good and respectable builders across the length and breadth of India. HDFC bank charges 0.5% f the loan amount towards processing fee charges excluding cess and service tax.
Click here to know more on home loan provided by HDFC Bank

Punjab National Bank: 

Punjab national bank is a popular public sector bank offering lucrative home loan interest rates. A large number of people are still biased towards public sector banks when it comes to home loans and roughly so as public sector banks offer slightly lower rate of interest and lower loan approval charges. Punjab National Bank charges 0.5% of the loan amount towards loan processing charges for home loan up to Rs 3 crore.