Switching to lower home loan rate: What you need to know
Home loan borrowers can avail of the facility to switch to a lower interest rate by opting for conversion or change of spread for the existing loan. By changing the interest spread on the loan, one can get the lower interest rate being provided to new borrowers. The borrower needs to choose between the options of increasing the EMI or the tenure of loan.
Request letter: Once the choice is made, a conversion request letter needs to be submitted in person to the nearest branch. The bank may also ask for a promissory note to be issued in its favour for payment of the balance at the new interest rate.
Conversion fee: Banks levy a conversion fee, which is usually in the range of 0.25-1% of the loan amount. This has to be paid through a cheque issued at the time of submitting the documents.
Bank scrutiny: Once the documents are submitted, the bank scrutinises them and, if satisfied, converts the loan to one with lower interest rate. A letter confirming the conversion, along with the revised terms and conditions, is sent to the borrower.
Fresh cheque: If the borrower has chosen to increase the monthly instalment and the mode of payment is post-dated cheques, fresh EMI cheques will have to be submitted.
Points to note
> The conversion application has to be signed by all the loan applicants.
> Some home loan institutions also offer the facility of initiating the conversion process online, subject to the submission of signed documents at their office
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