Things To Know Before You Transfer Your Mortgage Loan (Loan Against Property)

Mortgage loans are the high interest loans in the home loan industry. A loan secured against the pledge of an unmovable asset mainly the residential & commercial property are high end risk loans to the banks though being secured against the collateral, the interest rates offered are therefore high in comparison to interest rates in home loan. And this high interest rate component is the basic reason for transferring / switching the mortgage loan to more cost effective lenders.

Many a times the current mortgage lender seems unfavourable and is unwilling to negotiate on the mortgage rates, even though when there is a reduction in their base rates. The benefits of reduced rates are not transferred to the mortgage borrower and so the mortgage borrower feels the need for switching his mortgage loan to a better mortgage lender especially with a lower interest rate and value-added services.

Pre-Transfer Analysis

It is important for the mortgage borrower to first evaluate the different options of other mortgage lenders before making a transfer move. Learn about the current rates of the other banks and its processing fees. Now days there are numerous online platforms like those of LoanFastTrack – loan services in Mumbai that provides an instant solution for bank comparisons. A single click enables the loan borrower to compare on the various aspects of loan such as lowest interest rates, processing fees, foreclosure charges, repayment tenures, etc. The main purpose for evaluation is to locate the difference in the EMIs outgo and to calculate the savings on the loans. The actual savings will, however, depend on the amount of loan outstanding, difference between the interest rates, tenure remaining and the cost involved in switching.

On identifying the suitable mortgage lender the borrower must approach the lender for any further negotiations if possible. It is advisable that the borrower goes for negotiation with alternate 2-3 mortgage lenders to get the best deal on transfer.

How To Transfer?

Documentation: Once the negotiating deal with the best mortgage lender is finalized, the actual process of moving the mortgage loan from one lender to another lender starts. The initial step starts with the documentation of the borrower. The borrower is required to submit the required documents to the new lender. Documents required for the transfers are the borrower’s KYC, financial details, property details and the most 3 vital important documents which are to be obtained from the existing/current borrower, which are:

1) List Of Documents (LOD) – which states the list of original documents that the borrower has submitted with the current mortgage lender. It is to be obtained on the letter head of the current mortgage lender.

2) Current Outstanding Letter – which gives the exact figure of the borrower’s outstanding loan balance till the current date needs to be transferred to the new lender.

3) 12-18 Months Repayment Track Record – it is the statement showing the borrower’s EMI repayment made over the last 1-1.6 years.
(Mortgage lender Banks/NBFCs takes 10-15 working days to generate the above mentioned documents. Time period varies from bank to banks/Nbfcs)

Internal Processing: On submission of the documents it is the time for internal processing by the banks. The banks processing involves login, borrower’s FI visit, personal discussion, sanction and legal & technical of the property. The entire scrutinizing process is a period of 10-15 working days depending upon the bank’s working culture which differs from bank to banks. 

Clear Dues & Pay The Charges

Once the mortgage borrower receives the confirmation on the approval of his login file he has to pay the necessary financial charges to the new lender namely the processing fees, administration charges, legal & technical charges, etc. to get the sanction letter from the new borrower. Also it is important that the mortgage borrower clear the pending dues, penalties or foreclosure charges with his existing lender to allow them the approval of his loan transfer process.  

Disbursement: On successful clearance of the financial charges with both the lenders it is the time for the final disbursement of borrower’s loan with the new lender. The borrower has to clear the disbursement formalities, contract signing and make payment towards government charges of stamp duty/ registration without which a loan cannot be disbursed by any lender. Every time a mortgage borrower switches his loan to a new lender every time he pays the government charges of stamp duty/ registration. 

It is therefore very important for the mortgage borrower to analyze the cost-profit analysis from all angles before making a decision to switch his loan.

Summary: 

Though it is concluded that the best time to carry out a mortgage loan balance transfer is during the early years of loan tenor, as any drop in the interest rate during this period will benefit the most (reason – because the interest component in each EMI is higher than the principal component in the beginning years), transferring the mortgage loan in Mumbai seems no easy now-a-days, especially since November 2019 when all lender banks/Nbfcs started charging the foreclosure charge on all non-home loan cases. Prior to November 2019 it was a general practice with the lender banks/Nbfcs to charge foreclosure charges only to the fixed interest rate loans but since November 2019 it soon got extended to floating interest rate loans as well. The banks now charge a foreclosure charge of 3-4% (differs from bank to banks) on all non-home loan cases. 

This makes the transfer for loan against property no longer cost effective.

To know more on cost effective and cost savings mortgage loan transfers click on www.loanfasttrack.com

Loanfasttrack is a specialized Loan provider in Mumbai markets with its existence in the Online market since 2015. It offers loan services in Mumbai on Home Loan, Mortgage Loan, Personal Loan, Business Loan, Car Loan, Top-up Loans & Loan Transfers.