How does home loan refinancing work?

What is home loan refinancing?

How does home loan refinancing work?

Home loan transfer, also known as home loan refinancing, is the process of transferring your current home loan account to another bank or a non-banking financial company to avail better services with a lower interest.  

If you are not satisfied with your high-cost home loan, don't lose hope, as you now have the option to transfer your loan from your existing bank to a new bank, in addition to taking advantage of the higher loan amount  To save on interest.

How does home loan refinancing work?

The process of home loan transfer is quite simple and hassle free. 

Here is a simplified explanation of how home loan transfer works-

You can start the transfer process by writing a bank transfer request letter to your existing bank.

Upon receipt of your request, your existing bank will review your application and issue a NOC with your payment history.

The truth about refinancing your mortgage

Upon receiving the above documents, you will have to present them to your new lender.  The documents are fully verified by your new bank to ensure the ability to repay your loan.

Home Refinancing? How does it work?

How does home loan refinancing work?

Once verification is done, the new bank prepares to close your account by accepting your loan amount to your former lender.  

As soon as the transaction is completed, your property documents are handed over to your new lender.

Since your home loan will be treated as a fresh loan by your new lender, you will once again have to go through the procedures of technical verification and legal verification of your property documents, along with the credit evaluation conducted by your new lender.

Once you move your loan account to the new bank, you will have to pay the home loan processing fee to your new lender.

This is how the refinancing process works.  However, before transferring your home loan, you should keep a few factors in mind:

Refinancing Home Loan Tips

Before transferring your home loan, make sure that you carefully study all the terms and conditions, including legal fees, processing fees, stamp fees and other costs that you may have to pay to your new lender.

Try switching your home loan in the initial years of the loan.

Transferring your loan after two to three years of loan repayment will not reduce your interest burden as you will have to repay a large part of the interest amount by that time.

If you have a fixed interest rate for your home loan, then transferring the loan will not be beneficial as it carries a pre-payment penalty, thus, the house has to be a costly affair. 

Refinancing Your Home Loan

Switching a loan can be beneficial only if your loan is at a high floating interest rate.

Last but not least, it is worth clarifying all your questions and doubts before taking your loan to a new lender.

Before opting for loan switch, compare the interest rates offered by various lenders so that you can go to the best rates.

At the same time, before finalizing the decision to transfer your home loan account to a new bank, try to negotiate with your current lender to reduce your interest rate. 

Ideally, you should decide to transfer your loan only if it leads to significant long-term benefits.

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