Is this the right time to refinance your home loan?

how it works: V. Swaminathan, CEO, Andromeda and ApnaPaisa says, “The borrower has to submit the home loan application to another lender for the approval process for home loan refinance.” The second lender first verifies the details of the loan agreement, asks for the required documents and then gives the final approval for the transfer of the loan.

Let’s take a look at the reasons you might want to refinance. home Loan And what should you keep in mind?

To take advantage of the lower interest rate: Gaurav Mohta, Chief Marketing Officer, HomeFirst Finance says, “Lowering your interest rate can reduce your interest outflow, shorten your tenure and allow for more savings. You only have to refinance at the beginning of your loan tenure. Must be committed as this is the time when most of your EMI payment is attributed to interest outflow.” You should consider refinancing only if you are getting 3% or more reduction in ROI (interest rate). Otherwise, for loan ₹50 lakhs or less, the transaction cost would be quite high and it would not make sense mathematically. Rule of thumb – break down your transaction cost into monthly installments and see if you can break even in 6 months.”

Switch from fixed to floating rate and vice versa: “Sometimes, when you choose a fixed interest rate, you soon regret it because the interest rates start falling. In such a case, switching to the floating interest rate is a wise move,” says Mohta.

But in some instances, it may make sense to go a fixed rate. Swaminathan says, “If the loan is taken during the festive season offering, the interest rates are lowest, and thus it makes sense to choose fixed interest rates as the interest rates are definitely going to rise in the near future. “

To increase/decrease loan tenure: “By reducing the tenure amount, the borrower can become debt free quickly. Reducing the loan amount can help the borrower save on the loan repayment amount, which is calculated on a cumulative or compounded annual basis,” says Swaminathan. You can also opt to extend your loan tenure if you want lower EMIs can also choose.

You may want to refinance your home loan to get a top-up loan from a new lender or because you are not satisfied with the services of your existing lender.

“Before refinancing, you need to find out the total interest to be saved on the old loan (a) and the future interest payable on the new loan (b). “AB Total is the amount that you have saved with your loan throughout the tenure.”

Remember that there will be additional costs like processing fee, document verification fee etc.

Now may be a good time to refinance a home loan as the interest rates may not come down any further.

“At the beginning of the pandemic, RBI reduced key rates, but for the past 6 times, it has sought to keep the repo rates unchanged. And there is little chance that they will do so any further. “The prevailing low rates can provide real benefits to many borrowers when they opt for refinancing,” says Santosh Kumar, Vice-Chairman, ANAROCK Group.