How Do You Know When It Is The Right Time To Refinance Your Home Loan?
A housing loan refinance is when you take a home loan from certain lender, but over the course of the tenor shift to a new lender. This move is made because of many reasons; however, the main cause of doing this is to tackle the unfavourable loan terms persisting with your current lender. These unfavourable conditions could be high interest rates, bad customer service or even binding terms and conditions that do not allow you to make a prepayment on the loan without penalties. These are a few circumstances that compel borrowers to refinance house loan, also known as doing a home loan balance transfer.
However, shifting to the new lender may not turn out to be so advantageous if your new lender doesn’t offer you substantially better terms or if you are too late to make the move. Hence, it is important to identify the perfect timing that is ideal for refinancing your home loan to get you the most out of it.
The Perfect Timing to Consider for a Home Loan Refinance
If you do not refinance at the correct moment, you could suffer from high refinance interest rates, higher EMIs and ineffective terms and conditions. Here are a few circumstances when you could opt for a home loan balance transfer:
- In Cases Where Your Lender Forbids Foreclosure: Foreclosure can be defined as repaying the full principal before the end of the tenor. Foreclosure has a lot of terms and conditions and high penalties by numerous lenders as this move makes them lose out on interest payments. Hence, they introduce fines and penalties to protect their interests. If you have the money to foreclose your home loan, seek a refinance and move to a lender that allows foreclosure with the minimum hassle.
- When Interest Rates Are Too High: Depending on when and from whom you have taken your home loan, you could be paying high interest rates. If your loan is based on floating interest rates, it is likely that your interest is soaring up faster than your ability to repay. When you find it hard to make timely EMI payments, you should look for a lender who offers low refinance rates. This can help you save a significant sum of your income and help make EMIs more affordable.
- When The Customer Service Quality Is On A Decline: Certain lenders have inadequate customer service, which fails to support you in times you need help or support. If you notice this with your current lender, do not put up with it. After performing good amount of research seek a refinance to access the service and facilities you deserve.
- When All Negotiations Have Taken Place and Failed: When borrowers face issues with their existing lenders it is important to have a dialogue with its representatives before making any drastic moves. This dialogue may consist of negotiations over high interest rates, or even to arrive at a mutually beneficial solution for foreclosure. However, sometimes lenders have rigid rules and in such cases these negotiations are likely to fail. When all negotiations which you have tried have not worked in your favour, go for a home loan balance transfer and enjoy the benefits of low interest or better facilities.
- In Event of other Lenders Offering Incentives Like a Top Up Loan for a Transfer: Numerous times competing lenders provide attractive offers and incentives to borrowers for a balance transfer. These incentives go beyond discounted interest rates such as a large amount of a top up loan with a low interest that is offered over and above your home loan. You may use a top up loan to renovate your house, refurbish the furnishings or add a new wing as per your choice. In such a case you can do a balance transfer and chose the lender with the best incentives.
Most importantly, the timing of your home loan refinance depends on how much time has passed since you have taken your existing home loan. Transferring early, in the beginning of your tenor, helps you save money while transferring later may not save you much at all. So consider the timing carefully before proceeding. Seek a beneficial home loan refinance now with Bajaj Finserv, which offers nominal interest rates and added conveniences like a top up loan.