In recent years, many people have voluntarily opted to refinance their Home Loans due to many benefits that come along with it. The most important one is the decreasing interest rates that have increased the number of competitive deals for customers in the market such as a Home Loan Balance Transfer.
For customers who are seeking to refinance their home loan, we at MyMoneyMantra provides you with 3 essential reasons as to why refinancing your home loan may be beneficial.
Reduction in the EMI, Interest Rates, and Home Loan Tenure
- Low-interest rates: Home loans are taken for a significant period, and their interest rates are subject to change over the years. This long-term debt may find an increase or a decrease in their interest rates. Hence, people look to refinance their Home Loan and Find a Home Loan Balance Transfer Offer to lower the interest rates than the current rates being paid.
- Fixed and variable loan rates: If you experience a frequent change in interest rates, conduct a review about whether a fixed rate or variable Home Loan rate is needed. A fixed loan rate can help improving and making the budgeting much more accessible however variable loans are much more flexible. Opting for a fixed loan rate is frustrating as a reduction in the interest rates doesn’t affect the loan amount. Variable loan rates will include payment of any potential rising interest rate. You can also split the loan by refinancing it by partly variable and partly fixed.
- EMI (Equated Monthly Instalment): A change in the financial position of an individual would see the need for more cash flow. Refinancing your Home Loan can lead to a reduction in the EMI and to add to the cash flow. The reduced interest rates in turn also reduce the original EMI paid.
- Home loan tenure: Before refinancing the Housing Loan, if the monthly EMI was kept constant, it can help in reducing the tenure. Everyone would want to pay off their credit as soon as possible and refinancing your home loan is the best option for it.
Personal expenses and consolidation of debts
- Home Renovation: An upgrade to your house and renovating it would make it feel like you are living in a brand-new house. For example, financing for a new kitchen or a new playroom for the children could be fulfilled by refinancing your House Loan. This can be done by applying for an additional loan on the already existing one or by changing the lender with a higher borrowing capacity.
While calculating the amount needed for renovation, it is essential that no overcapitalization happens which means. the cost of restoration should be a lot lower than the value it will add to your newly renovated house.
- Personal debts: You may have to repay multiple debts having high-interest rates, such as Credit Card bills or a Personal Loan. If you’re opting to refinance your Housing Loan, opt for consolidating all such these with the loan. By consolidation, the equity of the house will act as a security for that additional debt and multiple loans are categorised as one.
Such an option can save up on many interest payments and any additional fees as the loan has now been combined into one. However, before consolidating, check if there are fees that need to be paid to refinance the amount as well as any penalties.
Poor services from the existing bank
If a different bank is providing a reduction in the interest rates of the Home Loan, people decide to opt for a balance transfer Home Loan option. This is done when the original bank where the credit has been taken fails to offer the correct services properly. A few examples include failure to issue loan statements on time, bad customer care services, and delay in providing information on changing interest rates. This makes it even more essential to make the switch and refinance your home loan with a bank offering good services.
Today, refinancing a Home Loan is considered extremely beneficial if done correctly and for the right reasons. You can save a significant amount of money by refinancing your loan if appropriately done which can be taken as additional cash flow and utilised in a much better way.
Consider all possible scenarios and research all potential consequences and fees if any for making the change to your loan before taking a decision. Before refinancing your house loan, ask our experts at MyMoneyMantra.
Also Read: When NOT to Opt for Home Loan Balance Transfer?
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