Home Loan Refinancing In India: Things to Know Before Applying For Refinancing

Are you still paying a high rate of interest on your home loan? Are you unsatisfied with the services of your existing lender? Does your existing rates remain unchanged even after a change (reduction) in the banks lending rates over the Coronavirus effect? Then probably it is time to refinance your home loan.
Important Highlights
- Home loan refinancing gives you a opportunity to:
- Enjoy lower interest rates.
- Enjoy longer repayment tenures.
- Transfer fixed interest rate loans to floating interest rates loans and vice-a-versa.
- Get top-up at lower interest rates.
What Is Home Loan Refinancing?
Refinancing means financing again. And hence home loan refinancing means financing of your home loan once again. In simple terms, the process of shifting your home loan from existing lender to a new lender is called as home loan refinancing. Refinancing helps to reduce your monthly EMI by saving on your per month interest outgo with the new reduced rate of interest from the new lender. Home loan refinancing is also referred to as home loan balance transfer or simply home loan transfer or home loan switch in the home loan/mortgage industry.
There are various service providers who guide you in your home loan refinancing. But choosing one that is knowledgeable also fully equipped and trustworthy, can save your time and money. Loanfasttrack is therefore a preferred choice of many home loan borrowers. It provides a comparative evaluation of the rates, processing fees, etc. of the top banks at just a single click. Amazing discounts available for home loan refinancing cases. Hassle free services & free services – no cost is the slogan of the company.
Benefits Of Home Loan Refinancing
Once you have decided to transfer your loan with a new lender, it is important to compare the rates, offers, and charges of the various lenders. You must evaluate the option before switching the loan to a new lender. At times home loan transfers come with an offer of zero processing fees, especially during festivals and at financial year closing of the lenders. Below given are the vital benefits of home loan refinancing.
1- Switching the loan helps to reduce the current interest rates
Home loan is a long term financial commitment. Any change in the interest rates of the lender, will substantially change your interest amount and the EMI outgo. The home loan refinance gives you the opportunity to shift your loan with a high rate of interest to a lower rate of interest. Since home loans are taken for longer tenure, there always is a chance for the interest rates to fluctuate. A reduction in the repo rate reduces the lending rates of the lenders. However you are less benefited from the reduction in the rates as the benefit of lower rate is generally not transferred to you and if transferred it is a delayed process and is also not as per the industry standards. At times the lenders also charge you with a conversion fee in order to reduce your existing rate of interest.
If you get any unsatisfactory response from the existing lender towards your request for the rate change, then it is a time for you to explore a new lender who is standing at your door with a better deal offering low interest rates and prompt services; switch your loan to this new lender.
Additional read: Know How To Deal With The Increasing Interest Rates Of Housing Loans
2- Top-Up loan opportunity
The home loan refinancing facilitates you with an opportunity to avail additional loan over and above your existing outstanding loan. This is called a top-up loan and is offered at the same interest rates as home loans. A top-up loan is offered for maximum loan tenure of 15 years. A top-up fulfils your immediate fund requirement and is therefore a more preferred option than other types of loans such as personal loans, business loans or mortgage loans. Also the rate of interest for top-up loans is competitive than other modes of loans. Hence a top-up loan can be applied to close your high interest rate secured or unsecured loan such as personal loan, consumer loan, credit cards, car loan, etc. and thereby reduce the monthly EMI obligation.
Condition to avail a top-up loan:
1) Your income must suffice to be eligible for additional loan.
2) The top-up amount is subject to the market value of the property i.e. the LTV (Loan To Value) criteria of the lender. Maximum LTV taken is 80%.
3) Lower figure among 1 and 2, will be your top-up loan eligibility.
For Example – If the market value of the property is 70 lakhs, loan taken is 50 lakhs, loan amount repaid within 2 years is 10 lakhs and the current outstanding loan amount is 40 Lacs, the top-up loan eligibility as per the LTV norms will be as follows.
70lakhs * 80% = 56lakhs – current outstanding loan amount of 40lakhs = 16lakhs.
Additional read: What Do You Mean By Loan Eligibility In Home Loan?
3- Opportunity to switch to fixed rate of interest from floating rate of interest
You as the loan borrower reserve the right to select the desired interest rate (either fixed or floating) for yourself while applying for a housing loan with a lender. However over a period of time your preferences might change from a fixed rate to floating rate and vice-a-versa. Considering the current effect of pandemic Covid-19 on the mortgage industry in India, the lending rates and housing loan interest rates have reduced to the 2005 lending rates in India. This opportunity for securing lower interest rates has changed the preferences of many loan borrowers to switch to fixed interest rate housing loans. If there is no corresponding offer from the existing lenders allowing you to shift to fixed interest rates you can grab the opportunity of home loan refinancing. In fixed rate loans, the interest rates are fixed for 1 year/3years/5years/10 Years.
4- Get longer repayment tenures
If for any reasons you find difficulty in paying the existing high EMI’s you may request your lender to increase your loan repayment tenure. Increased loan tenure will give substantial relief in the EMI amount and will ease your financial burden if any. However if your existing lender puts restrictions on extending the tenure or refuses to increase, you can go for home loan refinance. Home loan refinance not only increases your loan tenure but also offers you with low interest rates.
5- Tax Benefits
You can continue taking the tax benefits even after applying for home loan refinancing i.e. up-to Rs.1.5lakhs in a year towards the principal amount repaid (under section 80C of the Income Tax Act) and Rs.2lakhs per annum towards the interest paid (under section 24).
Other Reasons To Opt For Home Loan Refinancing
- Unsatisfactory services from the existing lender.
- Not issuing home loan statements on time.
- Poor customer care responses and services.
- Slow in reacting to the changes in the interest rates.
- Your changed financial conditions such as decrease in income, burdens of additional responsibilities, etc. which in turn affects your ability to service the EMIs.
- When you wish to reduce your loan tenure and the existing lender is reluctant for a tenure change.
Pre-Conditions To Apply For Home Loan Refinancing
Following are the important pre-conditions to remember in order to apply for home loan refinancing.
- Timely repayment of your EMIs.
- Clear repayment track records required. Good track record of all existing loans is required.
- No latest delayed payments within 12 months.
- No latest EMI bounces within 12 months.
- No unpaid dues or pending dues.
- Good CIBIL score of 750 and above.
- Home loan must be at least 6 months old.
- Minimum age criteria to apply is 21 years while the maximum age criteria is 60 years.
There are lenders who transfer loans only on the basis of your 12 months repayment track record. For example – ICICI bank’s Express BT (Balance Transfer) product.
Documents Required For Home Loan Refinancing
Checklist for Loan Sanction KYC
- Latest passport size colour photographs of all applicants.
- Pan card copy of all applicants.
- Residence proof – copy of aadhaar card, passport & electric bill.
- Application form duly signed by all applicants.
Financial Documents
I) For Salaried Customers
- Latest 4 months salary slips.
- Latest 6 months bank account statement (salary reflection).
- Latest 2 years Form 16.
- Latest 1 year bonus copy- if any.
- For rental income receivable- if any:
(a) Copy of registered rental agreement.
(b) Latest 1 year bank account statement reflecting the rental credit. - Latest 2 years ITR copy– for agricultural income receivable if any.
- If joining new company
(a) Copy of joining letter/ appointment letter/ offer letter of the new company.
(b) Copy of resignation letter.
(c) Reflection of One month salary credit in bank account statement. - A Cheque towards the Processing fees of the bank/NBFC.
- Other important documents for transfer:
(a) LOD (list of documents) from the existing loan bank.
(b) Repayment track record for 18 months.
(c) Outstanding letter copy from the existing loan bank.
II) For Self-employed
- Last 3 years financials of the applicant including Saral Copy, Balance Sheet, P&L account, Capital Account & tax audit report (if applicable) – CA certified with membership no. and UDIN no.
- Latest 12 months bank account statement of the current account.
- Latest 12 months bank account statement of all savings accounts.
- Latest 3 years Form no-26 AS.
- Latest 1 year copy of GST returns – 3B form.
- For rental income receivable- if any:
(a) Copy of registered rental agreement.
(b) Latest 1 year bank account statement reflecting the rental credit. - CA certified debtors & creditors statement aging for 1 year.
Other Documents
- Business profile on the letter head of the company.
- Business proof – GST registration, Ghumastha or Copy of AAdhar Udyog.
- Copy of contract letter if received any contracts.
- If proprietor profile is:
(a) Chartered Account (CA) – Copy of COP & passing certificate.
(b) Doctor – Copy of Degree Certificate. - Details of all existing loans along with the sanction letters (for calculating loan obligation).
- Transfer Documents:
(a) LOD (list of documents) from the existing loan bank.
(c) Repayment track record for 18 months.
(d) Outstanding letter copy from the existing loan bank. - Processing fees cheque in favour of the bank/NBFC.
Checklist for Legal & Technical of the property
- Copy of Prior chain of agreements.
- Copy of Index 2.
- Copy of latest property tax receipt.
- OC/CC + approved Plan copy.
- Copy of Share certificate.
- Copy of society registration.
- LOD copy.
Checklist for Disbursement Process
- Original prior chain of agreement with stamp duty & registration duly paid & along with the copy of index 2.
- OC Copy.
- Original share certificate (If Issued).
- Latest property tax receipt.
- Society registration copy.
- Docket kit duly franked and signed by all applicants.
- 7- Security cheques in favour of the Bank.
- Administration Fees clearance by cheque or DD-demand draft.
- Facility agreement duly franked and signed by all applicants.
- Copy of BT draft agreement duly franked and notarized and signed by all applicants.
- NOC from Builder.
- NOC from society with chairman and secretary signature.
- Original copy of LOD & Outstanding letter.
- For CIDCO/MHADA Property
(a) If conveyance deed is executed- copy of conveyance deed & original NOC & transfer letter from CIDCO/ MHADA.
(b) If conveyance deed is not executed – copy of tri-party agreement & lease agreement. - Any other documents as per:
(a) Credit Manager’s requirement.
(b) Property Legal report.
(c) Sanction condition on sanction letter.
Conclusion
To conclude, a natural temptation to opt for the better deal on the interest rate, services and tenures is what urges you to opt for home loan refinancing. But before opting, you must secure clarity on the charges involved in processing which are processing fees, administration & legal and technical charges and other charges as applicable on home loan refinancing. Be aware of the fact that the new lender will treat your request as a fresh home loan and you will have to go through the entire loan procedure once again i.e. the loan sanction process, FI visits, credit appraisals, legal and title search for the property, property technical and valuations, etc.
Remember don’t refinance your home loan if:
- The refinancing costs are not justified.
- You are nearly through with your loan repayment. Refinancing is generally not advisable after 5-6years of the loan repayment because in the initial period you already pay a substantial portion of the interest amount.
In the home loan/mortgage industry, the term home loan refinancing is also used in one more context i.e. the funding provided on the already purchased residential builder property. This is also termed as home loan refinancing. Read our previous blog Home Loan Refinancing to know more about it.
Related Blogs:
- CIBIL And Its Significance In Home Loan
- How To Read Home Loan Sanction Letter Of Bank.
- DON’T GET FOOLED !! MUST KNOW ALL COSTS IN HOME LOAN
- Know The Co- Applicant In Home Loan
- What Is Home Loan EMI?
- Difference In Applying Home Loan With Public Bank & Private Bank
- Know How Your Home Loan Inquiry Impacts Your CIBIL Scores
If you are looking for genuine service providers in Mumbai to help you refinance your home loan, visit us on https://www.loanfasttrack.com/. Loanfasttrack will provide you hassle free services at your doorsteps with comparative evaluations of more than 13+ top banks, with no additional cost. You can also contact us on 9321020476 or email on info@loanfasttrack.com.
About Loanfasttrack- Loanfasttrack is a Mumbai based loan provider company since 2015 offering loan services in Mumbai on– housing loan in Mumbai, mortgage loan in Mumbai, personal loan in Mumbai, business Loan, unsecured business loans, home loan transfer, top-up loans, car loans, educational loans and loan transfers.
It also helps you:
√ To find the best bank for home loan
√ To get lowest home loan rates in Mumbai
√ To get an instant loan in Mumbai
√ To get instant personal loan in Mumbai & business loan in Mumbai
√ To make you qualify for the maximum loan against property eligibility
√ To get a low cost home loan balance transfer
√ To get assured low interest rates for loan against property in Mumbai