Home loan takeover process by banks explained

The first item for a bank that shows interest in a takeover of a loan from another lender is to verify the statement of the existing Home loan account as well as a statement of the SB account maintained by the proposed borrower in the existing bank. Do remember that loan transfer is only possible when the borrower is regular in loan repayments to his/her current bank. Secondly, there should be a convincing reason why the borrower wants to transfer the loan from the current lender. There may be several reasons why the borrower wants to transfer his/her loan account to another lender. The reasons may be that the existing bank/lender is not ready to release the additional loan (top-up loan), lower interest rates in the prevailing market to which the current lender does not agree to reduce the interest rate, or the current lender is not ready to enhance the repayment period to reduce the EMI, etc.

Once the borrower decides to transfer his/her loan account to another bank, he/she has to request the present banker to issue a consent letter/NOC for transferring the loan account to the bank that is ready to take over the loan. The existing banker needs to issue a letter of confirmation to the new lender about the list of original title deed documents held by them and also give an undertaking that the bank would hand over all those documents to the new lender on the closure of the loan with them.

The takeover loan will be treated as a fresh loan by the new lender. The entire process like physical verification of the property, legal opinion on the property, valuation of property by the panel’s valuer, CIBIL report, and credit appraisal which includes evaluation of repayment capacity of the borrower for enhanced limits will be done again as a fresh proposal. For the sanction of take over limit, the borrower has to pay again for the processing fee, professional charges of a lawyer, valuer fee, etc. at the new bank.

Tips to borrowers: A borrower should be careful about the teaser rate of interest on housing loans offered by some lenders. Check the teaser loan terms and conditions, before deciding to transfer the existing housing loan account to other banks. The teaser rate remains for a limited period which will be subsequently adjusted to a higher rate of interest. In such cases, you may incur a substantial loss on account of transferring the loan amount to another bank by way of payment of processing fee, legal fee, valuation fee, etc. again and also payment of premature closure charges levied by the previous lender.

Other useful home loan-related articles:

How to examine title deeds of house property?

How do banks process home loan applications?