Optimizing Finances with Loan Against Property Balance Transfer

Loans against property, also referred to as property loans or mortgage loans, are loans availed of by pledging a residential or commercial property as collateral. This significantly reduces the risk for the lender and thus, loans against property are sanctioned at low interest rates. Further, these long-tenor loans also carry tax benefits which can help you reduce your tax liability significantly. 

Loan against property balance transfer refers to the process of transferring the remaining amount on one’s property loan from one’s current lender for beneficial loan terms and conditions, such as a longer repayment tenor or a top-up loan. In this article, we walk our readers through the loan against property balance transfer process and highlight a few things that borrowers must keep in mind while availing themselves of this facility. 

Loan Against Property Balance Transfer: How Does it Work? 

If you are planning to apply for a loan against a property balance transfer, here’s how the process works. 

1. The first thing you should do is inform your current lender of your desire to foreclose your loan by either writing a request letter or filling out the loan against the property balance transfer form. 

2. Your lender will then release a No Objection certificate stating that they do not have a problem with you transferring your loan to another lender. Along with this, your current lender will also release the foreclosure letter, along with a list of documents you had submitted at the time of sanctioning the loan and a statement that shows your loan repayment history. 

3. With these documents in hand, you can apply to your new lender. 

4. Your new lender will now verify all the documents provided by you. They will also evaluate your repayment history and if they are entirely satisfied, they will agree to have your loan against property transferred to them. 

5. Your new lender will now repay your current lender. After this, your old lender will transfer the original copy of all the documents you had submitted at the time of applying for the loan to your new lender. 

6. After this, all the post-dated cheques that you had given to your old lender will get cancelled and now your EMI obligation will be to your new lender.

Also Read: Tips to Fulfill Documentation Criteria for Personal Loan

Things to Keep in Mind When Applying for a Loan Against Property Balance Transfer 

If you are planning to apply for a loan against property balance transfer, here are a few things you must keep in mind: 

1. Your new lender may charge a loan against property foreclosure fee. Thus, one must opt for a loan against property balance transfer after performing a cost-benefit analysis.  
2. If the remaining tenor is 10 years, there must be a 25 bps difference in the old and new interest rates and if the remaining tenor is 15 years, there must be a 50 bps difference in old and new interest rates for the loan balance transfer to prove beneficial. 
3. When you transfer your loan to another lender, you are given the option of availing of a top-up loan. Top-up loans come with flexible end-use sanctioned at a low rate of interest. If you need money for housing need, consider availing yourself of a top-up loan. 

The loan against property balance transfer scheme is a beneficial scheme. However, one must choose to go for this facility after deliberation and careful planning. Hope this article will help you.