5 Reasons For Which You Should Switch Your Lender
Changes usually are painful, but nothing is as painful as being stuck somewhere one does not belong. If you have a running home loan and you feel you are at the receiving end of your lenders' unwillingness to pass on the benefits of reduced interest rates, you might consider the option of switching your loan to another lender.
A 30-year loan contract should not stop you from reaping the benefits of switching your home loan. Do not dwell on what is stagnant. Instead, focus on how to turn your current situation to your advantage. Your life changes and so do your circumstances. Therefore, your home loan should also change accordingly.
MakaanIQ tells you about five possible reasons for you to transfer your home loan.
You want your interest rate reduced
Are you waiting for the Reserve Bank of India (RBI) to reduce its benchmark rate so that your lender also cuts its lending rate? If so, you should know that your prevailing home loan rate will not change till you ask your lender to reduce it. Easy though it may sound, it is no cake walk. Most lenders charge a fee (conversion fee) – the rate varies from lender to lender – for reducing your interest rate.
Now, if you are in such a situation, you must ask yourself two questions. First, is the cost of interest switch that your current lender is charging higher than what another lender is offering? And second, is the home loan interest rate charged by the current lender, even after RBI's rate cut, more than what others in the market are offering. If your current lender cannot offer you what is economically best for you, decide if your current lender is worth sticking to.
No home loan amount is too small to be transferred
If you think that your home loan amount is too small to be switched to a new lender, you should know that no amount of loan is too small to enjoy the benefits that the loan market has to offer. Sometimes people think their debt is not very big, so they desist from a cost-benefit analysis and market research. An extra penny that you spend to reach a new lender for a small amount of loan might give you better returns on your loan in terms of lower equal monthly instalments (EMIs) – and that for the same or smaller loan tenure. So, do proper market research.
Your under-construction property is ready for possession
If your under-construction property is now ready for possession, you might think refinancing the property is not a good idea. But you should know that the market value of the property will be of no essence to the existing or the new lender till the time you have not “received” the property; that is, got the keys of the asset in your hands.
If you plan to shift your home loan to a new lender while the construction of the property is close to the finish line, the loan eligibility will be worked on the basis of the agreement value of the property. Since it is the interest portion that hurts the pocket the most, it makes sense to try and save as much as you can.
Top-up at better lending rate for the same tenure
Top-up is the bonus of getting a home loan refinanced. In other words, it is the icing on the cake if you get an additional loan amount on transferring your outstanding loan at a lower interest rate – and that for the original loan sanction period. The top-up facility can be availed of from the current lender as well, but why would you pay the existing lender more for the running and the additional loan when there is someone who can give you a better deal.
The best part of a top-up loan is that banks are willing to offer these at the same rate as your home loan. It is advisable, though, that you do not apply for a top-up loan unless it is absolutely necessary.
You are unhappy with your lender's services
Home loan agreement is not just a 20-30-year contract but also a 20-30-year relationship that you share with your lender. You surely will not want this long association to end on a bad note. The lending process does not end with the disbursement of a loan. In fact, from the lender's perspective, handing over the loan pay order is just the beginning of the loan process.
Catering to the applicant's queries, submission and execution of transaction documents, time-to-time legal and technical checks, servicing of post-dated cheques, informing the borrower about the EMI hit in the accounts are a few things that the lender must do as part of its post-sale service. Your peace of mind will be directly based on how well these requirements are being met by your lender. If you have troubles with your bank's lending services which get resolved but keep recurring, you should consider moving to a lender with better services.