All You Need To Know About Internal Balance Transfer Of Home Loan
'Balance Transfer' of home loan is an alternative that most home loan applicants choose to benefit from the low interest rates prevalent in the market. When the existing customer of a bank does not get the benefit of declining home loan interest rate in the market, he moves to a lender who is ready to charge a lower interest rate.
But 'Internal Balance Transfer' of home loan is different.
Imagine a scenario where you have a home loan running and want to sell off the property (i.e. the property against which you took the home loan). The buyer of the same property, at the same time, wants to take the home loan from your lender. This is what is known as 'internal balance transfer' of home loans.
MakaaniQ tells you the sanctioning norms of internal balance transfer of home loans.
Pre-requisites of internal balance transfer of home loans
- Request letter from the existing home loan customer for foreclosing his loans in lieu of selling the property. If you are investing in a resale flat, here is how you could apply for home loan.
- A duly filled home loan application form must be received from the buyer of the property (now the new home loan applicant), along with the applicable processing fees
- Internal balance transfer is the transfer of property from the existing home loan borrower to the new one
- It is not the transfer of home loan from the existing home loan borrower to the new one
- No Objection Certificate (NOC) from the developer/ authority is mandatory
- Existing home loan should be closed with the proceeds of the newly sanctioned home loan amount
- The seller of the property may have to pay the pre-payment penalty if it is a floating rate home loan
- The sale price (of the property) or the remaining home loan amount needs to be disbursed to the applicant or developer, depending on the case
How to transfer internal balance of home loan
- It is important to understand that even though the home loan provider or bank will be the same, the parties/applicants are different
- If the buyer plans to take a home loan to fund the purchase of the mortgaged house, the seller will still be required to settle his home loan first
- The lender will always insist on closing the earlier home loan before starting a new one
- It is, in fact, better to take a housing loan from the same bank where the seller had mortgaged his property, because the lender will only have to evaluate the new borrower's financial eligibility
- Time taken for credit appraisal will also be lower, because all the property documents are already with the bank/ lender
- The seller will get the home loan outstanding letter, and the list of property papers called (List of Documents-LOD) for pre-closing his home loan
- The seller provides these property related documents to the buyer
- The buyer re-submits all property papers along with the Know Your Customer (KYC) Documents, processing fees and income proofs
- The bank assesses the home loan eligibility of the new borrower, and sanctions the loan
- The bank disburses the outstanding home loan amount in favor of the seller
Is legal and technical verification important for internal balance transfer of home loans?
Yes, legal verification is important because property documents will be in the name of the new owner. As there will be a transfer of ownership of property from one hand to another, the legal viability and marketability of the property papers will be mandatory.
Also, technical valuation will be important to assess the market value of the property. The lender will have to adhere to the Loan-to-Value (LTV) ratio norms for the new home loan borrower as well.