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07 JULY, 2022
If you have a home loan with a floating interest rate, now may be a good time to refinance. With a floating home loan, your interest rate will move in line with market rates. This means that if interest rates rise, your repayments will increase. So, if you are paying a substantially higher rate than the current market, it’s a good idea to refinance your home loan with a new lender. Read on to know more reasons why it is beneficial to refinance your home loan.
Reasons to refinance your home loan if you have floating interest rates
1. Save on interest payments: By refinancing to a lower interest rate, you will reduce your monthly repayments and pay less interest overall. This can free up extra cash each month, which can be used to pay off other debts. Moreover, interest rates on home loans are constantly changing, so it's worth using a home loan refinance calculator to see how much you could save by refinancing to a lower rate.
2. Save on fees and charges: Some home loans come with high fees and charges which can add up over time. By refinancing to a home loan with lower fees and charges, you can save money in the long run.
3. Consolidate your debt into one monthly payment: If you have multiple debts, such as a home loan and a personal loan, you can consolidate your debt by refinancing to a home loan with a lower interest rate. But before you switch, make sure to use a home loan take over calculator to find out what it costs to switch your home loan from one lender to another
4. Move from a variable rate to a fixed rate for more stability: Variable home loan rates keep fluctuating, which means your repayments can increase or decrease over time. If you're looking for more stability, you may want to consider switching to a home loan with a fixed interest rate.
Things to keep in mind while refinancing your home loan
There are a few things to keep in mind if you're thinking about refinancing your home loan. These are -
Compare your current interest rate with the new interest rate you are considering. Here, you can use a home loan transfer calculator to get a precise idea of how much you will save after refinancing your loan.
Simply enter your current home loan details (outstanding loan amount, interest rate, and remaining term) and the new home loan details (interest rate, term, and any fees). The calculator will give you an estimate on the monthly repayments for both loans and the interest payable over the loan tenure. This way, you can compare all the interest rates and opt for the best one.
Also take into account any costs associated with refinancing, such as appraisal fees or closing costs. Moreover, also consider how long you plan on staying in your home; if you think you may move soon, it may not make sense to refinance.
If you are one of the many homeowners who currently have a floating home loan rate, it may be in your best interest to refinance. Refinancing your home loan can provide you with a number of benefits, including fewer monthly payments, the opportunity to lock in a lower interest rate, better housing loan eligibility, and also a shortened loan tenure.
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