Refinancing your mortgage is an attractive option for individuals who are looking for ways to minimise the interest burden of repaying a loan. It can lessen the loan EMIs by a significant margin as you transfer the loan amount to a different financial institution.
Various lenders also offer other lucrative options, such as top-up loans, in case you go for loan balance transfer. You become eligible for such high amount loans with minimum documentation and lenient eligibility criteria.
Although refinancing comes with such benefits, it is often seen that people do not opt for this option because of lack of knowledge of the process and several misconceptions relating to refinancing of mortgage loan.
Myths About Refinancing Your Mortgage
Owing to various irrelevant concepts prevalent amongst individuals, borrowers often shy away from opting for refinancing their mortgages. It might be because they are of the opinion that they will have to pay a higher interest rate or consider that they do not have adequate equity to refinance.
Nonetheless, refinancing is a direct way to effectively repay your existing loan to the previous financial institution and pay a lower rate of interest. It is necessary to understand all the related details to better understand the process and reap benefit.
- Mortgage Refinancing is Free
Borrowers often miss out on the charges levied for refinancing. The refinancing process includes several charges including foreclosure and processing fee. These fees add to the principal amount. Although the cost is very minimal, you can also ask your lender to merge the cost with your new loan, you can pay the amount later in parts while you pay out the monthly EMIs for your loan against property.
- Refinancing can be Done Only Once
Refinancing can be done as many times as a borrower requires. You can refinance your mortgage at an affordable fee as set by various financial institutions if you find a better deal.
Lenders have extended this option to assess the amount with the help of an online refinance calculator. It shows the total sum, interest rate, and saving after refinancing is completed.
In addition, you should also check for the list of documents needed to apply for a loan against property. It will offer a clear idea about what documents you will have to submit during transferring the credit account to a different financial institution.
- Credit Score is not Assessed
Lenders are willing to present the customers with lucrative offers only if they have a decent repayment history. With an excellent credit rating, you might be rewarded with a lower loan against property interest rates for your new credit account.
A credit score of 750 is generally considered good. It shows that you have a better repayment capability and zero default history.
Additional Read: How To Increase CIBIL Score
- Refinancing will Affect the Selling of House Later
Refinancing your mortgage loan doesn’t have any direct impact on the property’s value. In case of simple balance transfer of the loan, the lender cannot bind you regarding selling the property. You can sell your property at any time and foreclose the debt with the funds.
- Only Interest Rates are Important
People usually consider only the interest rates when they opt to refinance a loan against property.
Various financial institutions including NBFCs have simplified the balance transfer for customers at affordable interest rates. It also brings you pre-approved offers to ease the loan application process and make it quicker.
These pre-approved offers are also available for various financial products such as home loans, personal loans, business loans, etc. You can have a look at your pre-approved offer by providing only some essential details like your name and contact details.
Therefore, refinancing your mortgage loan can be an effective option for repaying your loan amount. It is thus important to look at its features and benefits before opting for such a repayment structure.