Even if you have already taken a home loan and have paid several installments, it makes sense to stay aware of the latest interest rates, market deals, etc. We cannot deny the fact that the financial world is volatile and dynamic. The market keeps evolving; sometimes, the terms and interest rates change. It may happen that you may not find your original home loan profitable anymore! Then, you can consider “home loan refinancing”.
The home loan refinancing is a financial strategy aims to offer low interest rates and many more relaxations on home loans.
Let us know about this incredible opportunity that can enhance your homeownership experience and fetch you more savings.
What is Home Loan Refinancing?
With home loan refinancing option, you can put an end to the exiting home loan and take a new loan. The new home loan offers you lower interest rates and better loan terms. You would have observed that interest rates often fluctuate with economic changes. Sometimes, the new monetary policy can also lead to a change in interest rates.
You can switch to a refinancing option if your previous home loan charges higher interest rates. This will permit you to benefit from lower rates and make significant savings. With a low interest rate, you will have to bear a lesser monthly mortgage payment and less overall loan amount.
When Should I Consider Refinancing?
You should go for refinancing of home loan if it is lucrative and allows you to save considerably. If you are getting an option with a lower interest rate on a home loan, better loan terms, and other financial benefits, you can opt for it.
Top Reasons for Home Loan Refinancing
Here we explore the top benefits and why you should consider home loan refinancing.
1. Low Interest Rates
One of the key reasons to consider refinancing of home loan in India is to lower the existing interest rates. The interest rate fluctuates over time with changes in the market. If you realize you are paying a higher interest rate than the current market interest rate, you can opt for refinancing and save considerable money. Remember that even a marginal drop in loan interest rates can mean substantial savings.
2. Choose a Lesser or More EMI
Refinancing a home loan allows you to change your monthly due amount. You can decide the same according to your flexibility and convenience. You can reduce monthly payments if you are looking for more cash flow. Consumers are most pleased knowing their monthly mortgage payments have been reduced. This is another big motivation for homeowners to consider loan refinancing. With lower EMIs, you can have a larger monthly budget to splurge and use the same funds to fulfill other financial goals. However, you will need to pay more interest over the long term if you lower your EMIs.
You can also pay more EMI if you can afford. This way, you can shorten your home loan and become debt-free in a few years.
3. Change Interest Type
Refinancing also allows you to choose a floating-rate or fixed-rate home loan. If you are using a floating-rate loan and know that the current rates are favourable for the consumers, you can opt for a fixed rate when you refinance the loan. If you are currently paying a fixed-rate interest and looking for a flexible or lesser amount, you can switch to a floating interest rate.
4. Change Loan Term
You can refinance to a shorter term and save interest. However, this will make your EMIs heavier. Many people start with a 30-year loan, but with an increased salary, they can afford to pay a higher mortgage payment. If your EMIs are difficult to manage, you can refinance longer to lower your EMI.
Wrapping Up
Refinancing is a compelling option for various reasons. One of the main reasons for choosing a home loan refinancing is to lower your home loan interest rates. It also allows you to adjust monthly instalments, interest type, loan tenure, and more.
If you are indecisive and seeking professional advice, connect with Due Factory.
Disclaimer: This article provides a general guide to the subject matter. You should take a professional advice about your specific case.
FAQs
1. What is home loan refinancing?
Ans. Home loan refinancing means replacing your home loan with a new one, aiming to lower interest rates and receive better loan terms.
2. Why is home loan refinancing a good idea?
Ans. One of the main objectives of choosing a home loan refinancing in India is to lower the home loan interest rates. There are other benefits, like adjusting monthly installments, interest type, loan tenure, etc.
3. How often can you refinance your home loan?
Ans. Though there is no fixed limit on the number of times you can go for home loan refinance; there might be rules of frequency and timing. There is a waiting period before you can refinance again. Also, during this waiting period, you should make at least a few monthly payments before you take a new loan.
4. Are there any downsides to refinancing your home loans?
Ans. Sometimes, refinancing is not a great option. When you cannot save much on the interest and the same is costly or has other negative financial consequences, you should assess the benefits before refinancing.
5. Will I pay extra fee to refinance my home?
Ans. Refinancing may cost you. For example, you will have to pay a processing fee. There might be some additional charges, too, depending on the lender. Consider the same while calculating your interest savings.