With interest rates going down and more cuts expected in the times of come, does it make sense for those who have taken a home loan to shift to another bank?
According to loan expert Harsh Roongta buyers should shift loans only if the new bank is offering them a lower rate of interest and the cost of shifting (it is the 0.20% mortgage fees plus a small administrative charges) is enough to justify the benefit. Where floating or fixed rates are concerned, in the current environment when interest rates are expected to go down, it makes no sense to lock into a fixed rate.
Buyers should also remember that they will be treated as new borrowers by the new lender and therefore be offered better rates than what they are actually paying.
This is what those wanting to shift banks will have to do. Identify the lender who is offering significantly lower rate of interest than what is being charged by your existing lender. Make an application for housing loan with the relevant documents. On receiving the sanction letter from the prospective lender, approach your existing lender with a request to provide you the total outstanding amount (principal + interest).
Request your existing lender to give you a letter addressed to the new lender, stating the amount outstanding on payment of which they will hand over the documents to the new lender. This letter should also contain the list of documents that the existing lender has. However, it is very difficult to get such a letter from the existing lender.
So, try and approach your existing lender while you are readying an application to another lender simultaneously. You will also need an no objection certificate (NOC) from the society/statutory authority/ builder etc., in favour of the new lender and this may take time and/or also cost money.
The shifting of an existing loan comes with a cost. The existing lender will charge fees for processing your loan application.
If your track record of payment is good, there is a chance your existing lender may offer you the facility of shifting to its own cheaper rate by paying some fee.