Home loan refinance involves borrowing a new loan from a different lender to repay an existing Home Loan. It is also called a Home Loan Balance Transfer. This facility helps borrowers to benefit from advantages like lower interest rates, which leads to lower monthly EMIs as well as other favourable features like fewer penalties and charges on pre-payment, foreclosure, etc.
Pros of Refinancing Your Home Loan
The tactic of Home Loan financing is easier than most borrowers imagine, and can be done without any hassle. First, study your current Home Loan and see what you monthly payments, i.e. EMIs are. Read about the interest rates being currently offered by lenders, especially after demonetisation and the implementation of the Real Estate Regulation and Development Act.
Then check new lenders and the services offered by them when it comes to a Home Loan. Although lower interest is bound to be your primary motivation for refinancing your Home Loan, make sure you read the other terms and conditions to make sure the Balance Transfer will help you save money.
Read about tax saving benefits of Home Loans here
Here are some of the pros of refinancing your Home Loan:
1. Cutting Down Interest and Making Your Home Loan More Affordable:
All Home Loans come with interest rates. These Home Loan interest rates can fluctuate from time to time. However, there is always the pertaining risk of these interest rates becoming too high for your comfort. High interest on a Home Loan can cause much stress amongst borrowers, and it is also the most common reason for refinancing a Home Loan. In an event where your interest amount is inflated, you can simply do a Home Loan Balance Transfer and shift to a new lender with a better deal, which is a lower interest.
2. Moving to Better Home Loan Services:
Different lenders offer different services and have varied methods of levying charges and penalties. Hence, before refinancing your Home Loan, it is important to see how your current lender’s services are. If your current lender has higher charges for pre-payment or doesn’t offer flexibility that you need, make sure that the new lender you chose to finance your Home Loan offers better and more enhanced services. Online Home Loan management, availability of staff to cater to your questions or queries, online Home Loan tools, etc. are some examples of better services apart from reduced fees and charges.
3. A Way To Get Flexibility On Your Home Loan Terms:
Any time you sign up for a loan, you also sign up for a range of terms and conditions. These conditions can benefit you in some cases and restrict you in others. Refinancing your Home Loan can help you choose a lender that offers you more benefits. If you realise certain terms that your old lender had imposed on you, refinancing gives you the option of going with a lender who gives you terms that are better suited to you. This may be something like a Home Loan EMI holiday to help you plan your finances better and take a break from EMIs for a chosen period or in times of financial troubles.
4. Creating Savings During Times of Income Variations:
Income is a factor that can be uncertain over time. A steady income can better your chances of paying your Home Loan EMIs and a sudden blow in your finances can make it difficult. However, if there is a sudden drop in your income due to any number of circumstances, you can consider refinancing. This tactic will help eliminate expensive EMIs of your old loan and let you choose a lower interest, which will help you reduce your EMIs. Use a Home Loan EMI calculator before you decide to refinance, since it will help you plan your move more effectively.
All in all, refinancing a Home Loan is beneficial in getting you a lower rate of your interest on your Home Loan. This is turn reduces your EMIs. If you want to keep the EMIs the same, a lower interest and the same EMIs will help you reduce your loan tenor and thus pay it off quicker. However, there is certain things you should be aware of before your refinance your Home Loan.
Check out your guide to getting a better home loan interest rate
What You Should Check Before Refinancing
- Irregular loan repayment can be a major threat to refinancing your Home Loan. Apply for a Home Loan Balance Transfer only if you have made timely payments of your EMI.
- Get an assurance from the lender saying that all the documents would be transferred to a new lender in definite time frame. This will help you save time and money during the process.
- When applying for a new Home Loan, you will be compelled to go through all the procedures again, like filling the form, submitting documents, etc. Make sure your new lender makes this process easier on you with an online application.
- Switch to a new loan early within the loan tenor to benefit most from the new loan’s terms.
Home Loan refinancing is a convenient option when done taking the right precautions and using a Home Loan EMI calculator. Experience its benefits today and make your Home Loan more affordable!