Reasons to Go for Home Loan Refinance Optionresource-Banner_WC
Home Loan Refinancing: What is it?
Refinancing your Home Loan can be a good option if you are looking to avail of more competitive interest rates or reduce your repayment tenor. Refinancing your Home Loan, also known as a Home Loan Balance Transfer, is a financial tool that allows you to repay your existing Home Loan with the help of another lender by switching your loan to them. This refinancing allows for a chance to negotiate better repayment terms, such as competitive Home Loan interest rates, a longer tenor, and a top-up facility, if eligible.
Home Loan Refinance: Should You Go Ahead with it?
While refinancing your existing Home Loan always sounds like a good idea, like all big financial decisions, it must be well thought through. Let us take you through a couple of scenarios under which you can consider a balance transfer, and by extension – refinancing.
Reduce Rate of Interest
A reduced interest rate should be the primary factor behind your decision to migrate your Home Loan to a new lender, as it saves you a great deal on your interest outgo. No one likes to pay more interest if there is an alternative. For example, if you have taken a Home Loan of Rs.50 Lakh with a tenor of 20 years at an interest rate of 8%, your total interest would be Rs.50.3Lakh.
But, if you are offered a reduced rate of interest by your new lender, say 7%, for the same principal amount, your total interest would be Rs.43 Lakh.
Consider what a new lender is willing to offer and weigh all options, and then make the decision to avail of a Home Loan Balance Transfer.
Shift from a Fixed Interest Rate to a Floating Interest Rate
If you are incurring more interest through the type of interest rate you have chosen, you always have the choice to switch. Also, on floating interest rates, you will be able to enjoy foreclosure benefits without incurring any additional penalties and fees.
Also Read: Floating vs Fixed Interest Rate Home Loan - Which One Is Better
Shorten the Tenor
Along with the benefit of reduced rates of interest, you will also have the option to cut down your loan tenor with a Home Loan Balance Transfer. This will help you service your loan faster and wrap up your financial commitment toward repaying the loan you have taken.
Opportunity to Avail of Additional Credit
If you opt to refinance your Home Loan, you get the opportunity to take up an additional loan. This is also called a Top-up Loan.
It can be used for any purpose, such as refurbishing your home, paying for a medical emergency, etc. Bajaj Housing Finance offers a Top-up Loan facility of Rs.1 Crore* or higher to eligible applicants.
Home Loan Refinancing: Things to Keep in Mind
It is advised to start Home Loan refinancing early. During the initial days, a major portion of your EMIs goes towards interest payment. So, if you opt for refinancing during this time, you ultimately pay reduced interest and save more.
On the other hand, if you avail of a balance transfer in the latter half of your tenor, you have already paid the bulk of your interest liability. Thus, your savings are relatively lower in this scenario.
*Terms and conditions apply
Also Read: Know the RBI Guidelines for Home Loan Balance Transfers
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