Finance

Home refinancing myths: are thy true or false?

Many home loan borrowers believe that home refinance is unnecessary because of rising interest rates. Some borrowers also believe that home refinance can only be done if your home loan has been fully repaid. Some people believe that refinancing your house is impossible if you do not have enough money. Do not be discouraged if you have thought about any of these. These are the myths surrounding home refinancing. Refinancing a home loan at best refinancing rates can help you improve your financial health by lowering your monthly EMI and the interest.

Refinancing is not expensive

Banks impose a prepayment penalty of approximately 2-5% on the principal amount if the home loan borrower chooses to refinance with a different bank. Once you agree to refinance your home loans with a different bank, you will be charged a processing fee. The processing fee amounts to roughly 0.5% to 1% of the principal amount. An expensive home loan can drain your savings slowly. You can save more by accepting the low refinance costs.

Yes, you can switch your loan regime

Once you have chosen a fixed-rate loan, it is possible that the overall interest rate starts to decline. It means that you may pay higher interest rates. Switching to a floating rate loan to reduce interest costs is a smart move. You can choose to home refinance with another bank even if your current home loan lender disagrees. There are no restrictions. Switching to another lender will make refinancing your house easy and smarter.

It is possible to choose another bank

Refinancing your house with an existing bank is better. This myth needs to be dispelled immediately. Anyone can refinance with any licensed mortgage lender. Opt out if the bank you are currently dealing with is not willing to offer favorable terms. There is no legal or moral obligation. It might seem easier to work with an existing lender, but it is not. You will save time and avoid unnecessary hassles by working with a new lender. When refinancing your house, it is a good idea to compare the rates of several banks and lenders. 

Refinancing is possible due to varied terms and conditions

Home refinancing is no longer economically feasible. It is actually important to know what your home loan interest rate is. You can save money if your home loan interest rate is 8.9%, and you refinance at 8.35%. Calculate your savings over the life of your home loan term, such as 20 or 25 years.

Vito Paucek
the authorVito Paucek