Refinancing is a commonly known but rarely used term in the Indian home loan industry.
Generally, when a borrower applies for a housing or home loan, they use an eligibility calculator to get information about the loan amount and EMI. But sometimes, after paying the EMIs for a year, they may realise that their lender is charging a higher interest rate than is charged by some other lender. In such cases, they may opt for a housing loan refinance.
Follow these tips before availing a housing loan refinance:-
Check Your Actual Savings
Often, the difference between the EMI that the home loan eligibility calculator shows you and the amount you pay can be vast. It is wise to inquire about the actual saving you will make by opting for the refinance.
Consider the Costs Involved
Housing loan refinance is nothing but closing the account with your current lender and opening an account with the new lender. But before you refinance, it is good to check the amount you need to pay as foreclosure charges and account opening or loan processing charges. In most cases, after the deduction of all fees, the saving becomes negligible.
Know the Process
If you wish to refinance your housing loan, you need to approach your current lender first. The lender will issue a no-objection certificate and other documents. You will need to submit the documents and other essential documents to the new lender. The new lender will then pay the remaining principal amount to the current lender, and inform you about the new EMI. Alternatively, you can use the home loan eligibility calculator to know the amount.
Conclusion
A housing loan refinance can result in hefty savings if you get the right lender and interest rates. But, in the highly competitive Indian lending sector, almost all lenders offer interest rates in the same range. Evaluate your actual savings before signing off the loan documents.
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