Refinance Home Loan Tips You Need To Learn Now

23 Jan

Refinance Home Loan Tips You Need To Learn Now

Tips to Refinance Home Loan

When the base rates decrease, the home loan rate of interest is slowly falls. This is huge news for the new home loan seekers who can avail a home loan at the present at a lower rate of interest. Borrowers who have by now taken a home loan at a higher rate of interest would be at a defeat.

Banks would now try to take hold of a greater market share, by calling to mind new customers for taking home loans at a lower interest rate. But what about the obtainable customers who had taken a loan before the interest rates cut down? Should they refinance home loan or their loan to avail the advantage of a falling interest rate?

Refinancing of a loan fundamentally means restructuring the existing loan, in terms of tenure, interest rate and type. Refinancing home loan involves varying costs such as the pre-payment penalty by the existing bank and the processing fee by the new one. In addition, these charges differ from bank to bank. Therefore refinancing is not always considered a correct decision.

Before making a conclusion, you must check whether the savings made after opting for refinancing are higher that the costs involved in refinancing. If it isn’t, then opting for refinancing is not the correct conclusion.

If the refinancing interest rate is smaller than the current interest rate by 1% or more then you should preferably opt for refinancing. If you expect a reduction in the interest rates, you must refinance your high fixed rate loans. Similarly, if you expect the rates to boost you must go in for a fixed rate refinancing.

The tenure and the interest rate are straight relative to each other. The longer the tenure, the higher the total interest paid and vice versa. So if you obtain a salary increment, refinancing your home loan at lesser tenure is the best alternative.

Refinancing home loan is not always the most excellent bet when the interest rates are low. It could work against you if the costs concerned are higher than the savings made. Work the math and then make a conclusive decision.

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