Your Finance Adviser

Have you taken a home loan? Has there been a change in your personal or financial status that makes it difficult to repay the existing loan? Are you simply looking out for a better deal on your home loan? Refinance Home Loan process is the answer to get a new mortgage for repaying your prevailing outstanding loans.

As a borrower, you can make a choice whether you wish to apply for a refinance with the same lender or approach a different financer. However, you need to do your thorough research or consult a Mortgage Broker who shall assist you in drawing comparisons by reviewing the present market.

Since you have already been eligible for an initial home loan, refinancing process could be less complex and much easier to get processed. 

Why would you need to refinance your home loan?

There could several goals why you would want to opt for a refinancing option. We list some of them as below:

* Better Rates: You may come across better interest rates, terms and conditions, features or value added services after having opted for home loan from one particular lender

* To reduce mortgage repayments: By refinancing and taking on a new loan by extending the repayment timeframe, you may be able to reduce the amount you need to pay each month

* Require funds for alternate requirements: In many cases, you may need additional funds to either renovate or upkeep of your home. Refinancing could enable you to enhance your existing borrowing limits

* Purchasing a Vehicle: Car loans are more expensive with higher interest rates compared to home loans, thus you may choose to fund the cost of the vehicle by borrowing against your home. Once again, you can opt for a new loan completely, or raise funds with refinance investment loan

* To combine all your debts: If you owe debts such as on credit cards, personal loans or car loans, you may be able to save money by rolling them into your mortgage. This can be either done through your existing lender and you may simultaneously also consider refinancing

If you are aware of the Pros, you must be mindful of the Cons as well:

PROS:

1. Interest rates become one of the critical reasons that people opt for refinance options. You could often end up reducing your monthly EMIs which ultimately help you repay off your loans much faster than the proposed plan

2. You can have access to equity, which can be utilised for reinvestments, renovations, purchasing new car, taking holidays, leisure activities and so on

3. Flexibility becomes another important factor when you opt for refinance. You can decide the duration of your term that suits your lifestyle the best. If you decrease your loan term, you may have to make more payments, however, if you increase your payment, you will end up paying lesser interest and get rid of the liability faster

CONS:

1. Charges/Fees: Refinancing is a good alternative; however, study the costs that are involved in the same. You must have clarity of all fees involved during the process

2. Lender’s Mortgage Insurance (LMI): If your equity is lower than 20% of the property value, your lender will secure his protection if you ever default on your home loan repayment

3. Credit Score: Refinancing your home loan may impact your credit score since the application of the same is registered in your personal credit file

When is the right time to opt for refinance?

The process of refinance is subjective and individual scenarios decide whether it suits you or not. While it is not uncommon for people to refinance their home loans just within 3 months of buying their property, you do need to weigh your aces and negatives diligently before opting for the same.