When And How Should One Opt for Home Loan Refinance

We research quite a lot before opting for any particular home loan option, so why stop after you’ve got one? Refinancing your home loan involves switching to a newer and better lender to complete the leftover loan duration. The process is also called a balance transfer. There could be several reasons to do this, all ultimately helping you repay the loan in a more cost-efficient way.

Opting for any home loan comes with a lot of responsibility and paperwork, especially if you are switching from one lender to another. Therefore, make sure that all the effort is worth it.

1. What is the rate of interest? It makes sense to refinance your home loan only when the newer lender is offering is less than the current lender. Also, consider if your preference lies with a fixed amount or a floating one.
2. Is your payback period extending or decreasing? One can opt for a newer option in both scenarios depending on what your financial situation looks like.  Ensure that the new tenure aligns with your financial requirements.
3. Is the new loan amount according to your requirements? Some people might be looking to get a bigger loan amount and, therefore, refinancing your home loan will be a good idea. It will give you that window to get more at the same/lesser rates.
4. How far are you from the total loan repayment? If you have almost completed more than 80% of the amount, then you might not be able to reap the most from a refinance. A mid or early-stage position is ideal.
5. How happy are you with the non-financial factors? A lot of non-monetary factors also matter when you’re dealing with a home loan repayment process. Things like customer service and bank reputation also come into play. If you are not satisfied with your current lender, opting for a newer lender bank can definitely help.

The biggest and most important phase of the whole home loan refinance process is the one that happens before the actual transfer, i.e., research and making up your mind about switching to a new lender. Once you have made the decision, just complete all documentation with your new bank, pay off dues in the old one and then let the newer bank pay the older one and take over the whole engagement.A home loan refinance could be one of the best financial decisions you make in life, but make sure you are double checking the pros and cons before making the switch.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.