What Is Surrogate Balance Transfer in Home Loans?
In the home loan application process, finalising the paperwork is the most testing experience, especially for self-employed consumers. The process becomes more complex if you want to transfer your loan from one bank to another. Now, for those who want to transfer their existing home loans to another financial institution, banks have introduced a 'surrogate balance transfer' scheme. Under this scheme, self-employed applicants do not have to present a huge pile of financial statements and balance sheet; the eligibility for the loan is worked on the basis of their repayment track.
Self-employed professionals and non-professionals qualify for surrogate balance transfer of loans.
Home loan and its variants, loan against rent receivables (LARR), loan against property (LAP) and interest saver (LAPIS) fall under the scheme.
Repayment track record
Loans to be taken over should have had a clean track record throughout the repayment period, set as at least 18 months by most lenders. Since the eligibility is calculated on the basis of the repayment track, the record is expected to be clean, with no irregularities.
If a bounce in instalment during any period is because of an operational inefficiency, the lender might consider the case after scritinising certain proofs. Many banks do not lend if the repayment track of the loan to be taken over is lower than 18 months (that is, if the prescribed norm of the bank is a period of 18 months).
The repayment must include the EMI, not pre-EMI (that is, the interest portion of the loan amount disbursed).
It is mandatory for applicants to provide the repayment track and the schedule, along with a bank statement reflecting that regular EMIs are being paid.
The tenure will be restricted to the period for which your previous bank sanctioned you the loan. For instance, if your old bank had sanctioned the loan for 10 years, the new bank cannot fund you for more than 10 years.
The funding is totally based on the repayment track of the loan, so the income documents are not collected from businessmen (the case may vary in some cases) and the eligibility based on income parameters (that is, gross receipts or net profit method) is also not assessed.
Except for the eligibility part, all other processes are in line with the extant guidelines for home loans. Lenders might conduct the necessary visit to the business premises, to verify the existence and the operation of the unit.
Loan to value ratio
Most banks do not fund beyond 75 per cent of the market value of the property under surrogate loan transfer scheme.
The loan amount
Many banks do not consider taking over loans below Rs 25 lakh. The maximum loan amount is restricted to the extent of the amount of EMI being served by the applicant. The scheme is good for the businessmen who do not have high profits to show but are confident about repaying the loan.
Healthy bank balance
If the borrower has a healthy bank balance and the average monthly balance can accommodate the EMI, the surrogate home loan will come easy.
Assets not the only parameter
It is important for the applicants to know that their assets are not considered as their income under this scheme. The value of your assets makes your case strong but it is not the sole criterion to decide your eligibility.