Reasons to Go for Home Loan Refinance Optionresource-Banner_WC

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5 Min 16 Jun 2022
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Highlights
  • What is Home Loan Refinancing?
  • Why Opt for Home Loan Refinancing?
  • Things to Keep in Mind

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 business expansion or debt consolidation. 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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DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

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