A property purchased after long years of struggle and hard work can help individuals to meet their financial needs via a Mortgage Loan or Loan Against Property. Senior citizens and entrepreneurs usually prefer these loans for various funding requirements.
But did you know that Mortgage Loans can be refinanced with new terms like other loans? Yes, people refinance their Mortgage Loans to save money. Refinancing means paying off an existing loan by taking another loan at favourable terms.
Refinancing can reduce interest costs, EMIs, or even increase or shorten the loan tenure. However, certain considerations borrowers should understand before refinancing a Mortgage Loan, including optimal timing and the steps involved.
When to Consider Mortgage Loan Refinancing?
- Dropped Interest Rate: Taking advantage of reduced interest rates is the primary reason to refinance a loan. A change in the market condition may make borrowers consider refinancing. If the prevailing lending rates are lower than the current mortgage rate, refinancing offers the opportunity to save on the total interest cost.
- Improved Credit Score: An improved credit score can help borrowers obtain a Mortgage Loan at a lower interest rate. If your credit score improves and is currently higher than when you took the Mortgage Loan, it is an excellent reason to refinance your Mortgage Loan.
- Better Financial Situation: Refinancing may be beneficial if the borrower’s financial state has improved. There can be a significant pay increase, and the borrower may want to refinance their Mortgage Loan to shorten the loan term. It ultimately saves on overall interest costs.
- Increase the Loan Tenure: If borrowers struggle to make high monthly payments, they can consider refinancing it and increasing the loan tenure to reduce the monthly payments. However, keep in mind that longer loan tenure means paying more interest.
Optimal Time To Mortgage Loan Refinancing
A key aspect of refinancing a mortgage loan would be to select an ideal opportunity. Normally, an EMI for a mortgage or loan against property for senior citizens shall cover the interest cost along with the principal amount. Initially, a majority of the EMI payment mostly goes towards settling the interest portion. Recommending refinancing during the first half of a loan term is a financial expert’s go-to advice, particularly for loans intended to aid seniors in unlocking their property’s worth. By doing this, one can gain considerable savings on the total loan expense, which is a wise decision for managing finances and maximizing property assets’ advantages.
Considerations for Mortgage Loan Refinancing
- Interest Rates: Savings on interest cost is the primary objective of loan refinancing. Understand how the lender calculates the interest rate and check if the loan cost decreases.
- Foreclosure Charges: The borrower pays the foreclosure fee to the existing lending institution as they close the loan account before maturity. Borrowers must check what the lender charges to close the account.
- Processing Fees: It is the fee charged by the new lender to refinance a loan. Ask the lender about the amount to be charged as a processing fee.
Thus, refinancing a Mortgage Loan can be a smart move if done at the right time and for the right reasons. Consider these simple tips and enjoy an affordable Mortgage Loan with refinancing.