Process to Refinance Your Home Loan from One Bank to Another
Home Loans are probably one of the most demanding loans for a person. It lasts for a long time and certainly does take a lot of effort to pay back successfully. While the interest rates for Home Loans are generally low, there are times when a borrower of a PNB Home Loan may find a better offer from a different lender say DHFL Home Loan at a later date. Refinancing your Home Loan is a good solution to this situation,
Home Loan balance transfer or refinance is a way by which you can pay your existing Home Loan by borrowing another Home Loan from a different bank. Usually, this is done because the new loan which is taken has much lower interest rates, compared to the old ones and this in a way is beneficial for you to reduce the pressure of paying extra every month.
Refinancing your Home Loan requires you to first request all the documents that you have submitted to the existing Home Loan provider. Once the lender has provided the consent, submit all these details to the new lender. After the processing, you are required to start paying EMIs to the new lender.
However, there are a few things that need to be taken into account during this process.
Before refinancing you have to make sure that you are eligible for the Home Loan Balance Transfer. The new lender will take into account all the details of your existing loan like payment history, existing loan amount and the current interest rate being paid. After looking at these details, the lender determines whether or not you are eligible to avail these loans.
2. No objection for foreclosure
As mentioned previously, there is a capping on the number of EMIs repaid, and this is applicable to any Home Loan like Andhra Bank Home Loan. Once this period is successfully borne, the bank will provide a ‘No ‘Objection Letter’ for the foreclosure of the loan. This is a crucial step because the new lender will not move ahead with the processing of the refinancing without this letter.
There are 3 things that you should request your existing bank when applying for refinancing.
No objection letter for foreclosure.
Payment history details
All related documents submitted to avail the current .
3. Verification from a new lender
Once the details from the existing lender have been received, you should then ask your new lender to start the process of refinancing. There are a few additional details which need to be provided to the new lender.
Proof of identity, KYC documents
- Proof of income
Documents shared by the existing lender.
After sharing these, the process is almost complete, and the new lender will address a cheque of the outstanding amount to the new lender to foreclose the loan. Once the new lender receives the payment, the existing loan will be closed, and the original documents will be handed over.
4. Additional Charges
One thing that most people don’t anticipate is the processing fee. These need to be taken into consideration while you also look at the benefits of the loan transfer.
The existing lender will also charge closing costs that will also add to the charges that you will need to pay for the refinancing to take place.
5. Types of refinancing
Rate and Term Refinancing:
This type of refinancing is typically carried out when you want to move your loan from one bank to the other for better interest rates and better payment terms.
Ideally, the loan amount remains the same, and the interest rates are reduced. The loan terms may change based on your requirements. For example, you could ask for a longer term of the loan so that your monthly instalments could be lower. It is important to look into the terms discussed in detail to make sure that you are saving money by moving to the new lender
This type of refinancing ensures that you get a new loan for your home on an already existing one. You can use the existing cash for any reason, and in most cases, it is to build on an existing house. The biggest advantage of these types of refinancing loans is that they help you get additional cash at lower interest rates but there are chances that you might be paying higher EMI compared to your existing loans. This is something that you must enquire well in advance and make sure that you will be able to pay the higher instalments that come along with it.
There are several other cases when refinancing can be a problem. For example, if you are planning to sell a house that is under a loan, transferring the loan to a new owner makes the most sense as you do not have to bear the additional costs of closing an existing loan and starting a new one with a different lender. Under situations like these, it is important that you make sure the new owner of the house is eligible for a loan.
Always remember refinancing comes with extra costs that vary from bank to bank. DHFL Home Loan may vary from an Andhra Bank Home Loan. Make sure the profit you make by refinancing is higher than what you will be paying additionally to both the lenders. You should also ensure that all the documents are properly submitted so that the process to approve the refinancing could move swiftly.
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