Banks and non-banking finance companies such as Bajaj Finserv provide a facility for transferring loan balance from one person to another.
When a borrower has a running home loan, but wants to sell off his or her property against which they have taken the home loan, and the buyer wants to take the home loan from the same lender, an internal home loan balance transfer takes place.
During a home loan balance transfer, although the bank or lender remains the same, the parties or applicants change. Even if the buyer has plans for taking a home loan to fund the purchase of the mortgaged house, the lender still requires the seller to settle his home loan first. Therefore, the lender will always insist on closing the earlier home loan before starting a new one during a home loan transfer process.
A home loan transfer process has some pre-requisites that the applicant has to meet. The existing home loan borrower must provide a letter requesting foreclosure of their loans in lieu of selling their property. If a buyer wants to invest in a resale flat, they have to apply for a home loan with a duly filled home loan application form, along with the applicable processing fees. A No Objection Certificate is also necessary from the developer or authority for a successful home loan transfer process.
The existing home loan is closed off with the proceeds of the newly sanctioned home loan amount. If it is a floating rate home loan, the seller of the property may have to pay the pre-payment penalty. The lender may disburse the sale price of the property or the remaining home loan amount to the applicant or developer, as is the case.