When Is The Best Time To Refinance Housing Loan?

Smart Finance

If there is one-benefit homeowners can get during the economic crisis, it is the opportunity to refinance one’s home loan. Take a classic example of a person who has bought his home 3 years ago. He would have possibly got his loan approved at a base-lending rate (BLR) of 6.75%. Currently the BLR rates are at 5.55%. For a house costing USD250, 000 or above, that would amount to a large savings if a house owner decides to refinance his home loan.

Money Wise

housing loan

Should one refinance their home loans, the answer is simple — if there are net savings to lower monthly repayments and save money in the long run as well as flexibility in cash flow management.

Many are still hesitant to do so as they believe their loan is still within the 5-year or above lock-in period, they cannot go about refinancing their loans. However, the reality of the situation is the opposite; homeowners can still refinance their homes even during the lock-in period.

What homeowners need to know is that in view of the low interest rate and competitive home loan products on offer especially with zero moving cost, exploring refinancing is worthwhile even if within lock-in period. In reality, one could also generate savings by refinancing one’s home loan.

Should I Refinance My Housing Loan Now?

The next question is why should homeowners go through the motions of refinancing, which is something they rather not worry about after buying their dream home?

For one thing, they get interest rate reduction. By reducing the interest rates, one benefits from a lower monthly repayment to ease one’s financial burden. Alternatively, the lower monthly commitment enables one to maximize the money set aside for any investment opportunity. In addition to this, if your home market value has increased substantially, you may refinance and cash out to fulfill your current needs or consolidate your higher interest debts to save on interest.

house

The Best Option Available?

In order to maximize one’s benefit from refinancing a home loan, it is best to fully understand one’s short-term and long-term financial plans and to choose an option that gives maximum value and returns with minimum risks.

Homeowners are advised to always compare home loans on the features offered to have a better idea of what you will be getting. For instance, many banks have zero refinancing costs packages and flexible products, which allow you to deposit your savings to offset on interest with flexibility of withdrawal.

However, homeowners should always review and choose some loan that matches his or her financial plan or economic management of income against expenditures. One has to always bear in mind that a flexible product is beneficial only if one can utilize the facility of deposit to offset on the interest. Otherwise, it would serve as a conventional loan where it defeats the purpose and a person could be paying higher interest rate plus fees and charges.

Rate this post