In case you are stuck with the same home loan since the past 3 years or more, it is time to look around and maybe even move on! As interest rates on home loans soar to a new low, it is time to scan the market and check for a better deal.
Do you know that $77 billion worth of total loans were refinanced in the year 2015?
So how to refinance your loan?
1. Decide, whether to refinance or not.
Loyalty is a trait consumers no longer want to reserve for banks, as they continue refinancing at record rates. But is refinancing your loan a good idea?
Potentially, a $300,000 loan with a term of 30 years and an interest rate of 5.65% p.a. refinanced at a rate of 4.6% p.a. can lead to savings of $229.43 per month and up to $82,592.87 over the duration of the term! Use our home loan switching calculator to see how much you can save.
Like most good things in life, refinancing is not free, but the one time switching cost can save you tons in the future if you plan the move right. Refinancing your home loan can ensure a home loan tailored to your needs at the best price you can get but there will be exit costs involved and other fees for the new loan. Add it all up to check whether the switching cost is more than what you will save over the life of the loan.
2. Refinancing for equity?
Many home owners refinance their home loan to tap into equity for the purpose of renovation or funding another investment property. While renovation does add value to your property, it has to be practically considered whether owing more on the loan is worth it or not. Funding another investment property may be a good idea, but be sure you can service two home loans at a go, and the interest payments are not tax deductible for your own home.
Refinancing is a good choice if it reduces your repayments (bringing down the interest rate) or cuts down the life of the loan (without costing you extra), or helps you build equity in the house that you can cash into for renovations or buying another investment property. The decision ultimately rests on your financial condition and goals.
3. Compare home loans
Comparing home loans is key to getting lowest rates in the market. While your existing lender may offer a good rate in order to retain you, mortgage brokers can often give you a better deal. Compare home loans on HashChing that features broker negotiated home loan rates can get you really competitive rates.
However, cheapest may not always be the best, which leads us to our next step below.
Click Here To Find A Lower Rate & Start Saving Today!
4. Decide what kind of loan would suit you
It is important to shop around for a loan that suits your financial requirements. Do you want to refinance to consolidate your debt? Are you looking for the flexibility of making additional repayments to be debt free sooner?
5. Understand the terms well
Before you sign the home loan contract, it is important to understand how your new home loan works, what are the monthly repayments and costs associated with the loan? What additional features are you getting that can help you in the long run? Do your home work well and discuss all the terms before you make the switch to benefit fully from your new home loan.
Refinancing your home loan can save you precious bucks if you make the right choice. Speak to a mortgage broker at HashChing and understand your situation better, absolutely free of cost.
By Vidhu Bajaj