Benefits of Refinancing Your Home

Did you just realize that you are much more on your home loan than your neighbor / friend / colleague or anyone else from the same bank? Are you wondering why your interest rate is significantly higher? It is a known fact that banks offer lower rates to new customer when compared to existing customers. It is now time to refinance your home loan so you can also nab these lower rate packages that stop your current home loan from draining out your savings.

However, before you take the time and effort to refinance your home loan, you need to be clear about what exactly are you looking for in your new home loan. Is it just an issue with your interest package or are there other aspects of concern as well? There are many questions that may make you rethink your decision. Some of them include –

• Do you want to refinance your home loan in order to decrease your monthly instalment payment amount?

• Do you want to shorten the tenure of your term loan so you can get rid of this loan faster?

• Will refinancing my existing home loan contribute to my savings or will the prepayment penalty on my existing loan nullify any savings I will make when I refinance to a better package?

• Will I be able to obtain a cash out equity loan on my property if I refinance to a better loan?

Although these are important concerns, the main concern will always remain as the interest rate. Even a difference of a single point can save you plenty of money over the course of your tenure. Refinancing your home is a big decision to make and you should consider certain important aspects additional to taking advantage of the low housing interest rates offered.

Changing your interest rate structure

If you presently on an adjustable mortgage plan or floating rate package, consider switching to a fixed rate package because continuous market fluctuations will give repeated panic attacks as and when the market moves. A fixed rate package will keep your mind calm and your wallet safe. Having a fixed rate package can help you plan your present and future finances much more efficiently because you will know exactly how much you have to pay for your home loan month on month.

Changing your loan tenure

It is common knowledge that the longer the loan tenure, the higher the interest you will be paying on your home loan. Another way to save on interest is to shorten your home loan tenure so you not only end your home loan fast but you also save on interest payments. However, when you decrease your home loan tenure, you will be making higher monthly installment payments. On the other hand, if you are unable to manage your current financed due to the payments on your home loan, then it is a good idea to increase your home loan tenure while refinancing because this will bring down your monthly payments.

Cashing out on your property by taking an equity term loan

If your property has just increased in value, it is a good idea to take a loan against your property value and making some fruitful investments or use that for managing your finances in a better manner by settling your credit card debt, emergency expenses and so on. This can help you maximize your personal financial returns. The logic here is very simple. Take funds from your term equity loan and make investments that will yield you a higher return.

You can see now that refinancing your home is not a small matter. It is a big decision you need to make keeping in mind many factors that may influence your decision making process. So sit down, think carefully, strategize and make a plan that will help you maximize your savings.