Many times finances are uncertain. It is possible that a few years after you take a home loan, you find yourself not comfortable with the interest rate that you are paying or not happy with the kind of service that you are being offered. In such a case, you can refinance the home loan.

Here are some of the reasons you could choose to do so:

Interest rate

This is a prominent factor that you should consider if you are thinking of refinancing. If the difference in EMI savings because of differences between your current interest rate and the refinanced interest rates appears significant to you then you should go for it otherwise not

Additional top up loan

While refinancing your home loan, you have an option of taking up an additional amount of loan. An example: You have taken a loan of Rs. 30 lakh on a property worth Rs. 50 lakh. After paying EMIs for a while, your loan comes down to Rs. 15. In this case, you can transfer your outstanding 15L home loan and also take a top up on the home loan as per your eligibility.

Fixed or floating?

The banks give you an opportunity to select either floating or fixed interest rates. While the fixed one allows you to pay the amount at a fixed interest rate throughout the tenure, the floating one keeps on changing. If you have availed of a floating interest rate and want to change it to fixed or vice versa, you can refinance your loan.

Processing Fee

If you are approaching a new bank for refinancing, it will have to process your application. The new bank will charge a processing fee that can be anywhere from 0% to 1% of the loan amount. Home-loan refinancing is helpful, but do it thoughtfully. Before refinancing your loan, make sure that you know everything about the hidden charges. Also, if you were not paying your EMIs on time then you might face some problems while refinancing the loan as well.



This Article is for information purpose only. The views expressed in this Article are personal and do not necessarily constitute the views of Kotak Mahindra Bank Ltd. and its employees

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.