Life is a progression. As such, we are always on the lookout for something better, be it a car, a restaurant, or a book. The same rule applies to home loans as well. But, is there a way to optimise home loans just like we can for other things? Yes! It’s called home loan refinance or home loan balance transfer.
Reasons for Refinancing Home Loan
Not sure whether you should opt for home loan refinancing? Given below are the reasons why you should –
- Lower Home Loan Interest
The most common reason why people choose to refinance their existing home loan is to enjoy the relief of lower home loan interest rates. For instance – if an individual is paying higher home loan interest on their current home loan and they find another lender is offering a comparatively lower interest on home loans, they could opt for a loan transfer to the new lender.
- Change in Financial Status
A change in income would affect an individual’s ability to pay monthly EMIs. In case some urgent financial obligation has cropped up, or your monthly income has decreased, refinancing a home loan to a lender that offers lower home loan interest rates and a longer home loan tenure is a good way to reduce the monthly EMI that you need to pay.
This works both ways. For instance – If you are in a better place financially now than you were at the time of taking a home loan, you can choose to refinance it for a shorter tenure for faster home loan repayment.
- Additional Loan Opportunity
Along with home loan refinancing, customers also have the opportunity to apply for a top-up loan – a loan taken over and above the existing home loan – at the prevailing home loan interestrates. However, you must opt for a top-up loan only if the new lender is offering lower interest rates. Otherwise, the refinancing will prove to a loss since charges will be incurred for a loan balance transfer.
Home Loan Refinancing Steps
Wondering how to get your existing home loan refinanced? Given below are the steps –
- Step 1 – Find out if you meet the home loan eligibility for refinancing – you must have paid a certain number of EMIs (as specified byyour new lender), etc.
- Step 2 – Approach your new lending institution with the necessary documents
- Step 3 – Fill in a freshhome loan application form with your new lender
- Step 4 – You will be required to pay certain charges such as home loan balance transfer fee, home loan processing fee, etc. Make the payment for such charges
- Step 5 – Once your home loan application has been approved and documents verified, a cheque of the outstanding principal amount will be issued in the name of the new lender so that the loan can be foreclosed
- Step 6 – On receiving the cheque, the original lender will hand over the original documents to the new lender
Before you apply for a home loan refinancing with another lender, make sure to check your home loan eligibility for refinancing and the applicable charges for a balance transfer. Apply for a home loan refinance only when you’re convinced that doing so will not prove to be a loss.
