SBI provides home loan at most attractive interest rates. Yuvraj wanted his home long transfer to SBI. He did some study and here are his findings.
Yuvraj carries home loan of Axis Bank. He was paying interest at rate of 10.75% on his home Loan.
He saw that State Bank of India (SBI) is offering home loan at interest at rate of just 10.15% pa.
He decided for a home loan transfer to SBI from Axis Bank. It was only logical, SBI as it was offering cheaper loan.
But what advantage Yuvraj will get by switching to cheaper loan?
Cheaper loan means early settlement & less interest payment.
Yuvraj calculated that, with his present loan balance. Reduced interest rate @10.15% will allow him to reduce loan tenure by 2 years.
Lower interest rate will also allow him to save interest charges by approx Rs 5,50,000.
Home loans are very high-value debt for a common man.
Reduction of couple of years in loan tenure, and reduced interest rates can make a huge difference in his/her status of living.
We may not realize it but regular EMI deductions devalues our standard of living.
We get adapted to a subdued lifestyle when we can afford much more.
Hence, the decision of home loan transfer to a more cost effective financer is only logical.
Home loan transfer to SBI – What is the Procedure?
Initially, Yuvraj was very skeptical about State Bank of India. SBI being a government bank, he was afraid that formalities will only lead to delay.
But he wanted to give it a try. He approached a branch of SBI which was close to his office.
He was pleasantly greeted by a middle aged person of home loan division.
Yuvraj told him that he is carrying a home loan of Axis bank. Yuvraj also explained that, he wants his Axis Bank’s home loan transfer to SBI to avail low interest benefits.
The banker immediately confirmed that 10.15% can be availed by Yuvraj’s on his current loan balance.
The banker also informed that it will take nearly one month for all procedure to be completed.
#1 What documents to be submitted to SBI?
The first hurdle in any home loan transfer is to be aware of the right documentation formalities.
What documents needs to be submitted to state bank to effect smooth home loan transfer to SBI?
The banker explained Yuvraj how to initiate the home loan transfer procedure.
- First he advised Yuvraj to approach Axis Bank, and put a written request to Axis Bank.
- The request should quote the home loan account number that needs to be transferred to State Bank of India.
- Once the request is submitted by Yuvraj to Axis Bank, the bank will issue a letter for SBI.
- In the letter Axis Bank must provide that following information:
- Outstanding Amount
- Pre-closure charges if any
- List of property documents hypotheticated by Axis Bank
- Possession Certificate or Conveyance Deed*
- Completion Certificate*
- Share Certificate*
- Loan Account Statement (Axis Bank in our example)*
- Blue Print (True Copy)*
In addition to the above letter of Axis Bank, the Account Holder (Yuvraj) should also provide to State Bank the following documents:
- Photocopy of Sale Deed /Property Agreement papers*
- No Objection Certificate by Society or builder*
- Property Tax Paid Receipt of last month*
- Electricity Bill paid receipt of last month*
- Society registration certificate*
- ID & Address proof of Loan Account Holder (Raj in our example)*
*These are minimum list of documents that SBI requires for home loan transfer.
#2. Formalities @Axis Bank to Transfer Home Loan to SBI?
Axis Bank would like to retain Yuvraj. Hence the transfer will not happen automatically. Yuvraj intervention will be required in Axis Bank as well.
Hence, soon after getting procedure details from SBI, Yuvraj visited Axis Bank.
He informed them that he wants to transfer his home loan from Axis Bank to SBI. He asked what is the procedure?
Axis Bank told Yuvraj that it is SBI that will dictate the procedure in this regard.
Yuvraj confirmed that SBI needs a letter from Axis Bank declaring the loan balance.
He also need the list of documents of his property that is currently hypothecated with Axis Bank.
To this request Axis Bank immediately logged in the request in their system with the following details:
- Foreclosure Statement: Will be made available in 15days. In this statement loan account balance will be declared by Axis Bank
- LOD: This will be a separate letter of Axis Bank. Herein they will declare the list of documents that is with Axis Bank of the property
- Original Documents Photocopy: Axis Bank agreed to issue a photocopy of all property documents that is there in their holding. But for this Yuvraj had to pay a additional money of Rs 281. Raj personally deposited this amount to his HOME LOAN ACCOUNT NUMBER. After depositing the money, counter receipt of the deposited money (Rs 281) was shown to the Axis Bank representative. The Axis Bank representative in turn logged in the request for documents photocopy.
#3. Charges to be paid to get home loan transfer to SBI
Once the above letter of Axis Bank and documents of account holder is submitted to SBI, the bank (SBI) takes over.
Hereafter all balance activities are executed by State Bank of India themselves.
State Bank of India calls the balance activates as SEARCH.
This is nothing but techno-legal verification of property.
In order to initiate the process of SEARCH, Yuvraj would be asked to pay the following charges:
- Advocate Charges: Rs 4,000
- Valuation Charges: Rs 845
- Total: Rs 4,845
The banker explained to Yuvraj that the total charge of Rs 4,845 is not refundable.
If after techno-legal verification, SBI declines Yuvraj’s request to transfer home loan, Rs 4,845 will not be returned.
There are other charges as well that are applicable to transfer home loan to state bank of India.
But these will be required to be paid only after SBI’s approval of the request of home loan transfer.
- Processing Fees: Rs 6,750 (applicable for home loan below 75 lakhs)
- Stamp Duty Charges: 0.2% of loan amount
- Extra for Property Insurance.
Why to consider home loan transfer to SBI?
A Combination of lower interest rate and Max Gain OD A/c Makes SBI unbeatable. This is one of the best products of State Bank of India (SBI).
Max Gain Over Draft (OD) account is perfectly placed for customers carrying home loan of SBI.
Max Gain OD a/c helps account holders to save heavily on interest portion of their home loan.
Max Gain OD account is actually a home loan account with feature of overdraft.
In an overdraft account, one can draw funds making account to go in negative balance.
Max gain account is just like a savings account with cheque book and online banking facility.
But max gain account comes at a cost.
An addition charge of 0.25% over and above home loan interest is charged.
Suppose Axis Bank is offering interest @ 10.15% pa.
If one opts for Max Gain a/c then net interest payable will be 10.15%+0.25%=10.4%.
But what is the advantage of Max Gain account?
Suppose Yuvraj carries a home loan of Rs 28Lakhs.
He has some liquid cash of Rs.5 Lakhs which he does not use for prepayment of home loan.
He can instead put this Rs 5 lakhs in Max Gain Account. The deposited Rs 5 lakhs will be treated as prepayment by SBI.
So your loan balance will be Rs 28-5=Rs.23 Lakhs. Interest calculation of home loan will be done on Rs.23 Lkahs @10.4% per annum.
Suppose, Yuvraj requires these Rs 5lakhs after 6 months, he can withdraw the from Max Gain account.