Mortgage Refinancing Slip-Ups To Avoid
With the recent slash in the interest rates on home loans by RBI, many housing loan borrowers are looking at refinancing options to reduce the interest rates. This method of refinancing is done by the borrower to pay off the existing loan and take a new loan with the same property as collateral. By doing this as a borrower, you will have the advantage to move from floating interest rate to fixed interest rate. If you have balloon loans towards which interest rate is paid from the long period, you can opt for refinancing and pay off the principal amount at the end of the loan tenure. Keep reading to know the mistakes one should avoid during the process of refinancing.
Credit score check
Before you apply for the refinancing of a mortgage loan, you should check your credit score and know the interest rate which you will be obtaining the new loan. Choose to go with the home loan refinancing option only when current equity is high to get the best deal from the lender.
Hoping for fall in interest rate
It is good that banks have announced a good reduction of interest rate on home loans. Waiting for more time with the hope in further reduction of the interest rate will put you to disappointment. In fact, this waiting will be of no use as you are using this refinancing option to repay the existing loan. If there is a drop in the interest rate further as per your expectation, you have this mortgage refinancing option always open.
Ignoring multiple charges
The aim of home loan refinancing is to reduce the interest rate on your loan but, your main focus while choosing a refinancing option should not be just on the interest rate offered. This would lead to making a wrong choice. Comparison of different options should be considered after taking various charges like processing fee, loan tenure and other aspects into consideration.
It is good to approach your existing bank for mortgage refinancing before you consider the next. Don’t expect the lender to offer you the best interest rate just because you are an existing customer. Don’t end up your trails here. Consider shopping around to explore different refinancing options for your home loan make the right choice.
Read out legal document
Legal agreement for refinancing the home loan are never limited to a single sheet. They are huge enough to demand the patience of the reader. Take time to read the legal document completely and take help from the legal expert to understand the technical jargon if needed.