It can be pretty frustrating for you to keep on servicing your loan at a high rate of interest when other borrowers need to pay rates that are substantially lower. The situation is all the more aggravating if your loan is on a fixed interest rate basis, and you will be stuck with a high rate of interest for quite a few years. Because there is not much use trying to persuade your existing lender to reduce the rates, it can be worthwhile to examine transferring your loan to another lender. However, the process is not as easy as it is touted to be. Some of the typical problems that you might encounter:
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Payment Of Fee Required To Avail Reduced Rate Of Interest:
You could have read the advertisements issued by a number of lenders inviting transfer of loans at a housing loan rate of interest that is very attractive. However, when you do enquire you may be shocked to discover that the advantage of the reduced rate of interest may only be available to you after paying a hefty fee that finds no mention in their advertisements. It is really better to avoid lenders who adopt such unethical practices because you never know what other surprises they will spring on you after you have actually transferred the home loan.
No Certificate From Existing Lender Regarding Original Documents In Their Custody:
Most lenders do not follow a practice of issuing letters confirming what original documents of the customer they have in their custody. Busy with complying with all the requirements of the lender at the time of the application, most customers also forget to ask for such a letter after the loan is approved. However, the new lender that you are approaching will ask for this confirmatory letter, and you will generally find yourself running after your existing lender for it. It is common to find the lender less than cooperative and trying to make things very difficult and so slow that you will perhaps consider giving up the idea of the loan transfer.
Issuance of A Foreclosure Letter That Is Not Acceptable:
If, after complying with all the rules of the new lender, it finally agrees to take on your existing home loan, your existing bank needs to issue a foreclosure letter specifying the amount that is payable to them for closing your home loan account. When you present this letter to your new lender, it will very naturally take a few days to process the request and issue the necessary payment instrument to your existing lender. The accrued interest for this period now also becomes due, and your existing lender will demand an extra sum to enable the account to be closed completely. It is essential that you request your existing lender to specify the interest rate applicable daily so that your new lender can add it to the payment amount and the earlier loan can be fully squared off.
Unresponsive Attitude Of The Lender:
You will notice a stark difference between the attitude the bank has displayed at the time of the original application and the time when you are requesting for the foreclosure. Most of the times, you will find that you are being fobbed off under some pretext or the other so that you are not even able to make a formal application for the loan foreclosure. Even if you do manage, usually the bank will take no action, and you will have to make repeated telephone calls and visits to the branch to make any sort of headway. You will most likely discover that no decisions are made at the branch level and that the request needs to be forwarded to their zonal or head office.The branch you are dealing with will plead complete helplessness, and ask you to wait it out. This delaying tactic is done deliberately in the hope that you will finally become frustrated and give up the idea of asking for the foreclosure.
Collecting Original Documents A Complete Nightmare:
Even though the existing lender is supposed to send all the original documents to the new lender directly, very often it insists that the documents have to be collected by the borrower and that all borrowers will have to be physically present themselves at the branch for the handover to be done. In case, any of the co-borrowers are absent, you will be asked to furnish a power of attorney in favor of another person authorized to collect it on his behalf. The concept of door-step service so proudly touted by the bank is obviously and very tellingly absent.
Getting your home loan transferred to another lender to enjoy the difference in the interest rate can be a very attractive proposition on paper but when you actually initiate the process, you can expect the existing lender not to be cooperative at all. Since you will require a lot of effort to get your loan transferred, you should do the math and find out whether it is really beneficial in terms of money saved.