1. Check your eligibility
You can opt for a home loan refinance if you have paid a minimum number of EMIs. Also, the home should be occupied or ready to be occupied. Check with your existing lender to know whether you are eligible. Also, a home loan refinance option works best if you do it within the first 5 years of your repayment tenure. This is because that is the time when the interest component of the EMI is at the highest. If your home loan has completed half the tenure or is nearing the end of the tenure, it might not work in your favour.
2. Do due-diligence
As we have seen, lower interest rates are one of the main reasons to refinance a home loan. Before you refinance your home loan you should keep a close watch on the interest rate movements. A falling interest rate regime may be a good reason to refinance your loan. This will play an important role in your refinance decision.
Quick Facts
- Around the world, housing is regarded as a means of long term wealth accumulation and financial stability.
- India's growing population of 1.4 billion (as on 23rd Nov 2020) people living in an area of 32,87,263 square kilometers. The density of population works out to ~426 persons per square kilometer
- Only ~45%* of the housing in India are considered as good per certain standards.
- The demand for new housing is increasing everyday.
3. Evaluate the benefits
Before refinancing a home loan it is important that you are sure of why you want to refinance your home loan and also have an idea of the benefits. Lower interest rates are one of the most common reasons to refinance your home loan. Even a nominal interest rate difference can mean a big difference in your monthly EMI outgo. Calculate how much EMI you are going to save after your refinance your home loan with a new lender.
You can use a home loan EMI calculator to help you with this step. However, there may be other reasons why you want to refinance your home loan. You may want to move from a fixed rate home loan to a floating rate home loan or vice-versa. You may also look to refinance a home loan if you are not satisfied with the services of their existing lender. Refinancing your home loan may also make you eligible for a top-up loan. Consider these options too and weigh the pros and cons.
Sometimes, based on your payment history, your may be able to negotiate your interest rate even with your existing lender. Check, if this option is available to you.
4. Know the fees
Even if it is a refinance, the new lender will treat it like giving a new home loan. So, there are some fees involved which you need to be aware of. Some of these would be the processing fee, valuation fee, stamp duty fee, legal fee and so on. It is important to consider all these fees when you evaluate the benefits.
5. Apply to your existing lender
You need to talk to your existing lender to refinance your home loan. For this, your existing lender will give you certain documents. One is the no objection certificate. The other is a document that states the details of your outstanding amount. You also need a foreclosure letter. Along with this you also need to collect all the loan related documents in your bank's custody. Some banks require you to visit the branch to collect your documents.
6. Approach your new lender
The next step is to approach your new lender and apply for the loan refinance. The new lender would need all your KYC documents and proof of income, including Income Tax Returns for the past 3 years. If not filed yet, speak to EZTax.in or take Expert assisted IT Filing to help you. You would also need to submit other loan related documents.
Conclusion
A home loan refinance can help you save on interest costs and also give you peace of mind. Once you have done your homework, it should be a hassle-free process. Check the latest home loan interest rates and start the process. Best of Luck !!
