A home loan is usually a commitment of 15-20 years. However, during this period, many things can change including a customer’s personal financial situation, interest rates, government policies and the state of the economy. It is always important to keep track of the outstanding amount on the home loan.
A regular review helps us take a financially prudent decision with respect to the loan’s foreclosure, balance transfer or top up.
To be able to take advantage of lower interest rates or better service, customers may want to transfer their home loan to another bank. For this one needs to have a timely EMI payment history and credit score. A balance transfer form along with KYC, income, employment proofs, existing loan papers, NOC from bank and a pre-closure letter with statement of payment history needs to be submitted to the new financer. Processing fee for this is usually waived by the new bank.
One may consider foreclosing the entire loan or paying up part of the outstanding loan to bring down the EMI or the tenure of the loan. A written application for the part payment or foreclosure needs to be submitted along with ID and address proofs and loan sanction papers. No charges can be levied on part payment of the loan. However, some financers may charge a fee for foreclosing. It is important to take custody of the original property papers from the financer on closing the home loan.
A top-up loan can be taken to meet financial needs up to the originally sanctioned home loan amount. The customer needs to fill up a form to avail the top up facility along with KYC documents (PAN, proof of identity and address), income proof, employment proof, title deeds and previous chain of documents. A processing fee is usually charged to the customer on the loan. This is a personal loan and hence the interest rate is on the higher side.
Points to note
- One should take note of the tax benefits that the home loan offers with respect to the principal payment and interest component, before deciding on the foreclosure.
- A top up loan can be availed along with a balance transfer loan from the financing company or the bank.