Home Loan Refinancing, What if you already have a home loan and are not fully satisfied with the amount you pay in the form of monthly installments? Are you considering home refinancing which may seem a great idea? But, does it have all pluses? Should you refinance your home? This is a big question for a home loan borrower who can think of refinancing his home loan to get better interest rates in the form of a reduced EMI burden.
These days, the trend of home loan refinancing has become more common due to the competitive industry landscape and money lending organizations offering lucrative deals to borrowers. But whether you should refinance your existing home loan or not. We will delve deeper to know the truth in the further section of this post.
Also known as mortgage refinancing, a home loan balance transfer simply refers to the pending home loan balance from one lender to another lender. In most cases, home loan borrowers choose home loan balance transfer to reduce their EMI burden as the new lender may offer reduced interest rates.
Other than this, it’s also feasible to include or delete a joint name on the home loan in some cases. For example, if a person gets divorced or stays away from the individual they live with. Under home loan refinancing, it is completely possible to add another person’s name to the loan subsequently.
Now, coming back to our main question – is it good to refinance a home loan? Below are some of the major reasons why it is a good strategy.
Loan refinancing rates basically rest on a number of factors existing in the economy such as RBI’s monetary policy, ongoing inflation, and others. If the interest rate on a home loan is more attractive than when the person opted their existing home, it makes complete sense to refinance the home loan due to lower monthly loan instalment. Reduced loan refinance rates are meant to help loan taker to keep their monthly EMI payments low. Moreover, they are likely to pay a curtailed total interest over the remaining loan tenure.
A person who wants to borrow money to finance a property but finds that the floating rate of interest isn't the right choice for them has numerous options, which are inclusive of loans with fixed rates of interest. If they don't know about the upcoming interest rates in the future, a fixed-rate home loan locks in the exsting interest rate so there is no chance of getting it increased in the future.
This type of loan may also be more advantageous if the borrower doesn’t intend to use the money for a long time, which is quite common with balance loans.
Another major reason behind the decision to transfer the home loan is the need to change the loan tenure. The primary benefit of choosing a reduced loan term is the reduction in interest payments.
For example, a borrower who earlier had a 20-year loan may find himself capable enough to afford one with a larger EMI payment. So, to reduce his home loan refinance rates and pay less amount, he or she may choose to refinance his home loan to a 10-year term.
On the other side, a person can potentially have a cash flow disaster and choose a home loan with longer term in order to make a lower monthly EMI payment.
If there has been an increase in the value of a home, the borrower could be able to borrow money for other elements like settling debts, home upgrades, or clearing other bills.
It may seem beneficial to have extra money on hand in the event of a cash-out refinance so that you can pay off any remaining balance on an existing house mortgage and benefit from reduced mortgage refinance rates. Additionally, borrowing money using cash from one's house entitles the borrower to significantly reduced refinancing rates compared to other types of loans. Tax consequences may come up from a cash-out refinancing transaction.
The smoothest approach to home loan refinance or balance transfer is to ask your new lender to pay off your old lender's debts and over take the remaining loan balance. Once you've chosen a lender with the desired terms and conditions, you may finish the necessary documentation and other procedures so that they can pay off your loan to your earlier lender and manage the remaining balance. Once this is done, you start stat paying EMIs as per the schedule set by your new loan lender.
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Are you looking to reduce your home loan EMI burden by choosing home loan balance transfer or refinancing? If yes, it is better to talk to experts like Investkraft. We have a team of home loan experts who can help you understand home loan balance transfers deeper and let you explore better home loan interest rates.