Transferring Home Loan? Be Ready For These Hiccups

Any hint of a drop in interest rates prompts home loan borrowers to review their existing debt and transfer it to another lender in a bid to reduce interest outgo on loan. However, the entire process is not at easy as it sounds due to the amount of paperwork and time involved in transferring an existing loan to a new lender. In fact, transferring the loan from one lender to another implies going through the same formalities as applying for a new home loan. 

It is recommended that borrowers should first try to negotiate with their existing lenders to bring the interest rates down in line with the offered rates for new borrowers. But, if there is no point in negotiating then be prepared to transfer it to a new lender. This requires one to be careful of few hurdles that can hit them along the process. 

1. Responsibility of submitting originals lies with borrower - An existing lender will be reluctant to hand over the original property documents to the new lender and rather assigns this responsibility to borrower. It will be the onus of the borrower to collect originals and submit it to the new lender to complete the disbursement.
2. Fee for reduced rates - Few lenders charge a fee to reduce rates on an existing loan and it is best to avoid such lenders for continuing your home loan. In such a scenario, switching lender is the only alternative. 
3. Foreclosure letter skips basic details - A ‘foreclosure letter’ is issued by an existing lender, specifying the amount required to foreclose the loan. However, many times, banks release foreclosure letters that are not clear in terms of interest applicable per day, thereby, delaying the process itself. Also, a foreclosure letter should not be time-bound, i.e., it should not give a time-frame of foreclosing the loan. Borrowers should carefully take note of these points before proceeding to transfer their loan to a new lender. 
4. Letter of confirmation for originals - A lender is obligated to provide a letter of confirmation to the borrower for the original title documents that it holds against a loan. Several new buyers, being unaware of the process, miss to collect this letter in the beginning, which could turn out to be a major roadblock later. 
5. Careless approach - An existing lender can become extremely careless when it comes to co-ordinating the loan transfer process as it translates into a loss of business for them. Therefore, a borrower should actively participate in carrying out the transfer formalities himself in order to save much of the time.  

To avoid these hurdles, it is only prudent for an investor to be clear with the requirement and formalities of transferring a home loan. Better to get a written advice from both current and new lender on their own requirements to steer clear of any verbal confusions later. 

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. She is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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