Summary: Home refinancing or a home loan balance transfer greatly reduces the home loan burden. It is a long-term commitment, and you may, at some point, consider a better option.
Home loan refinancing means transferring your existing home loan to another financial institute because of benefits like lower interest rates, better tenure, better service, affordable EMIs, etc.
The market fluctuates every now, and so does your credibility. Depending on your financial status and how diligently you have been paying your EMI, you may have an appraised credit rating, because of which you could get another lucrative home loan offer.
It is important to be vigilant and prudently consider all options before you refinance your home loan.
But you must know when to go for refinancing and how to process it. This guide will help you understand the fundamentals of refinancing.
When and How Do You Refinance Your Home Loan?
Let us review the details here and understand the most comprehensive and beneficial way to refinance your home loan.
Go For Refinancing In The Initial Few Years
While paying your EMIs towards your existing home loan, remember that the payment you make in the first few years compensates for the interest in your home loan.
The principal remains as it is.
Don’t delay transferring the balance, as it may not make much difference in the cost factor. If you get a better deal in the first few years, don’t think twice; just go for it.
Keep Your Financial Health in Check
To take advantage of refinancing your home loan on better terms and rates, you must not default on your EMIs, debt payments, or any other loan payment that you may have taken.
If you are wondering, “how much home loan can I get?“ then the answer is the way you manage your finances plays a major role in getting you to get the biggest benefits.
Your credit rating plays a major role in getting you the best offer deal when you consider a balance transfer of a home loan.
Research your New Financial Institution
Before you trust the new home loan provider, you must check the rates of interest they offer, reviews and ratings of existing customers, customer services, eligibility criteria, documentation process, and cost of refinancing.
Also, check if you can get a home loan top up facility from your new home loan provider. If a fee is attached to the balance transfer of home loans, you can negotiate it and strive to build a good relationship with the financial institution.
Check for Additional Charges Levied by your Previous Home Loan Provider
It is only at the time of refinancing that several existing home loan providers come up with new charges like foreclosure charges or prepayment penalties.
Make sure you read the terms and conditions of your home loan carefully and confirm such charges before you move on to the new home loan provider.
Check Cost vs Benefit
Of course, it is a lucrative offer to transfer your burdensome, high EMI-generating, existing home loan to a new financial institution charging you lower interest and giving you the best service.
However, you must wisely calculate the cost vs benefit and then decide.
You must calculate the difference between the remaining amount of the existing loan and the schedule prepared by the new provider.
Consider payment of interest amount, remaining principal amount, new interest amount generated, cost of EMIs, fees, and charges associated with refinancing, and the savings you may generate with this balance transfer.
Process of Refinancing
Make sure it’s a hassle-free process, and the new home loan provider helps you with an easy switchover from one mortgage to another.
Too much documentation, long wait time, or poor consumer service could dissuade you from refinancing. Trust only credible sources and understand the entire application process, documentation, verification, and approval before you go ahead with home loan refinancing.
Conclusion
Refinancing is a blessing, especially if your existing loan comes with big EMIs, long tenure, high-interest rates, and poor customer service. Before you balance transfer your existing home loan, familiarise yourself with the key factors and features of the mortgage refinance financial institution to calculate your break-even point and make significant savings.
