Aug 29, 2023

The Best Reasons to Refinance Home Loan in India

by Godrej Properties Limited

650

2

When applying for a home loan, one carefully selects a lender with the lowest interest rate and flexible term that fulfills requirements. However, the ever-changing home loan market might offer better options than the current mortgage. Refinancing a home loan in India by transferring it to another bank or NBFC can provide several benefits. Refinance meaning in banking implies taking a new loan to pay off the existing debt.  

The Best Reasons to Refinance Your Home Loan

1. Lower Interest Rate

One of the primary reasons for transferring and opting for home loan refinancing is to secure a lower interest rate. Imagine another lender offering you a reduced interest rate on your existing home loan. Also, this saves money and decreases total interest costs and monthly EMIs. 

2. Switching Interest Rate Types

You might be paying higher interest than necessary if you currently have a fixed or floating interest rate. Refinancing allows the borrower to switch to a lower interest rate, fixed or floating. For instance, suppose you initially opted for a fixed-rate home loan of Rs. 40 lakhs at 11% p.a. for 25 years, paying EMIs of Rs. 39,204. After two years, your outstanding balance is Rs. 38,92,226. By refinancing at 9% p.a., your EMI reduces to Rs. 33,445, significantly impacting your loan tenure.

3. Access to Top-Up Loan

Refinancing home loans in India also offers the option of a top-up loan. An incremental loan or top-up, available at an affordable interest rate, allows you to borrow additional funds based on your property's increased value. For instance, if your property value has appreciated, you can avail of a top-up loan for home renovation or other investments, making refinancing a wise choice.

4. Better Customer Service

Unsatisfactory service from your existing bank can be a valid reason to refinance your home loan. If your current lender fails to provide timely loan statements or unresponsive customer care, consider switching to a lender with a reputation for excellent service. 

5. Financial Status Changes

Refinancing can shorten your loan tenure and reduce EMIs if your income increases. On the other hand, if you face a financial emergency or your income decreases, refinancing can increase your loan tenure and lower your EMI burden, offering much-needed financial flexibility.

Conclusion: The Need to Refinancing Home Loan 

Refinancing your home loan in India can be beneficial but requires careful consideration. Before deciding, determine your goal and thoroughly research potential lenders to avoid increasing your liability. By making informed choices, borrowers can reduce their financial burden and optimize their loan terms.
 

FAQs

Q: Can you be denied a home loan transfer?

A: A lender may reject a refinance application for various reasons, that includes a poor credit score.

Q: Is it hard to qualify for refinancing of your home loan?

A: With a credit score of 700 or above and a reasonable Debt-to-Income Ratio, you can qualify for a home loan refinance.

Previous Post
Next Post