We may come across such situation in which seller want to sell his property but said property is mortgage with a bank or any financial institution as collateral security towards loan(s) availed in past. Seller may not able to pay of outstanding balance of loan before execution of sale deed in favour of buyer as seller may have financials disturbance. In such situation bank or NBFCs do Balance Transfer of Seller’s loan by making payment of outstanding loan amount to banks or NBFC and balance amount cheque in favour of seller.
Formalities Involved In Internal Home Loan Balance Transfer
- The buyer must request the existing property owner to present the letter showing the foreclosure of the loan in lieu of selling the property
- The buyer must fill the home loan application form and pay the applicable processing fee
- It is compulsory to obtain a No Objection Certificate (NOC) from the developer/authority
- The buyer needs to submit all his KYC related documents and income proof to the lender.
- A team of experts will carry out a legal and technical evaluation of the property as it involves the ownership transfer from one individual to another. The technical evaluation will decide the value of the property.
- The sales consideration will be disbursed to the new buyer as the loan amount. In return, the seller/banker will get a cheque from the lender.
- At the same time, the seller is required to hand over the property-related documents (photocopies) to the buyer. The original ones will be there with the lender.
What’s the Benefit of Having the Same Lender in an Internal Balance Transfer?
With the same lender, the legal & technical verification along with the credit appraisal will be much faster, leading to a faster execution of the transfer. It’s because the same lender would have all the property documents with it.
But Is It Worth Having the Same Lender from the Point of Cost?
It may interest the buyer more than the seller. After all, the buyer has to pay off the loan and not the seller from there on. So, from the buyer’s point of view, the rate of interest must be low enough to suit his/her budget. It makes for a comparison of rates, so buyer can online to do the same. The rate, even if higher by 0.50%-1% than the market rates, can make the buyer pay more. If that’s the case, it will be worth applying for a fresh home loan at a different lender, which will ask the buyer to submit a list of documents the seller must have submitted to the existing lender. The buyer could even be asked to present an interim security or persuade the seller to become a guarantor for the fresh loan. The interim security could be a house property in the name of the buyer.