What is a home loan refinance?
Refinancing of a home loan signifies full repayment of an existing home loan with another loan
with lower rate on interest compared to the previous loan. This allows the borrower to take the
benefit from the interest rate spread, and thereby, taking advantage of a perfect hedging
opportunity. However, to refinance your home loan can prove to be beneficial, when the
interest on the home loan is fixed, and therefore, advantages of any downside movement of the
interest rate in the market can’t be captured by the borrower. For home loans with floating
interest rate, this mechanism can prove to be very complicated, and inappropriate
implementation can result in huge …show more content…
Get your homework done at the outset
For procuring any property, you have to apply for a home loan and at that particular point of
time, check whether refinancing is permissible, or not. Though most of the organizations,
like Bajaj Finserv, offer refinancing facilities, some of them don’t. Therefore, it is always
better to go for taking loan from those organizations, which allow you to save your earnings.
If you make a proper decision at the very beginning, it can pay you the dividend later.
5. Do not go for refinancing frequently
Even if your home loan is on a fixed interest basis, it is not advisable to go for frequent
refinancing, as it involves both cost and risk. If you think that how often you should
refinance your home loan, then the simple answer will be either one or two times. There
are two reasons that can explain this. Firstly, refinancing frequently will cost you more than
you can probably save out of your refinancing options, and secondly, in a fluctuating interest
rate scenario, hedging can become too risky.
These are some basic ideas on how to refinance your home loan. Though there are plenty
other ideas, like refinancing from NBFCs, these are some of the fundamental points one