With home loan rates reaching new lows, many wonder if it is a good time to refinance home loans. Refinancing refers to paying off an existing loan by taking a new housing loan with better terms. Now, whether to continue with the same lender or choose to go with a new one is completely up to the borrower’s choice.
But when is it beneficial to opt for home loan refinancing? Is there a specific time or certain situations where this step should be taken?
Here are 5 situations when experts believe borrowers should opt for a home loan balance transfer:
- Significant difference in the interest rate
One of the biggest reasons why borrowers consider multiple loan plans before settling for one is the difference in home loan interest rates. Even a slight change can have a considerable impact on the monthly installments of a housing loan. With housing loan interest rates looking in the downward direction, it is quite possible to find a new lender offering a better rate as compared to your existing loan plan. So, if the home loan balance transfer interest rate reduces the total cost of the loan, it could be beneficial to make the switch.
- Credit score has improved
Many people do not know this, but with an improved credit score, they can get better deals on their existing home loans. If your credit score and income were low while getting a loan approval, it is quite possible for the lender to have charged a high interest rate on the loan. However, if the appraisals have been good and your credit score has crossed 750, lenders will offer loans with much better terms. Check if a new lender is offering a better interest rate and more suitable repayment tenure. Upon finding one, it is advisable to refinance your loan.
- Better services offered by the new lender
Home loan refinancing is not solely about getting a better interest rate. Sometimes, it is possible that the current lender is not providing satisfactory service. For instance, if the current lender is offering difficult pre-payment terms, does not have proper digitized account management, or provides unsatisfactory customer service, it is considered best to opt for a home loan balance transfer upon finding a lender that provides better services.
- Cost of refinancing is worth the trouble
Before refinancing the loan, it is important to know that there are certain charges such as the processing fees. Use a home loan balance transfer EMI calculator to understand what the monthly instalments would be and how much you are saving. This will help in understanding whether the cost of refinancing is worth opting for a home loan balance transfer.
Lastly, make sure to check with the new lender regarding the documents required for home loan balance transfer. If the current lender is agreeing to better the existing loan plan, consider refinancing with the same financial institution. This way, there is no need to bother about any documentation procedures since the current lender already has your details.
