Tips for a Smooth Home Loan Refinancing Process

Home loan refinancing, often also known as a home loan balance transfer, is a facility provided by most lenders these days. By making use of this facility, borrowers can transfer their remaining home loan from their current lender to another offering better loan terms and conditions. Most borrowers choose to go for home loan refinancing when:

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• Another lender is offering them a lower interest rate 
• When a borrower wants to decrease or increase their loan tenor 
• When they want to change their interest rate regime 
• When they wish to avail of a top-up loan

If you are planning to opt for home loan refinancing, figure out your goal first. Having a clear understanding of your goal will help you make better decisions. Now, here are a few more tips to help you experience a smooth and hassle-free home loan refinancing process.

1. Do Your Research

If you are planning to opt for home loan refinancing because another lender is offering a better home loan interest rate and you wish to benefit from it, which is the case most of the time, do your research before finalizing a new lender. If you have an offer from one lender, use the offer to negotiate with the other lenders in the market. If your aim is to avail of a lower  home loan interest rate, you should try your best to get the lowest interest rate you can get and not just something lower than your current home loan interest rate.

2. Check Your Credit Score

Having a good credit score is important and will most certainly help you avail of a low home loan interest rate from a new lender. The credit score is a three digit number that represents a person’s past repayment history and ability to repay loans on time. Credit Information agencies assign credit scores to borrowers based on factors, such as a borrower’s repayment history, their credit utilization ratio, the of hard enquiries on their name, the age of their credit history, etc. A good credit score, i.e. 750 or above indicates high creditworthiness and repayment capacity. Borrowers who have such a credit score almost never default on loan repayment and can be trusted completely. Thus, borrowers who have a credit score of 750 or above have high negotiating power and can negotiate better with their lender for a low interest rate and other beneficial loan terms and conditions. Borrowers planning to go for home loan refinancing must check their credit score and go ahead with the home loan refinancing application only if their credit score is at least 750.

3. Take Into Account the Fees and Charges 

Borrowers on floating rates of interest can prepay or foreclose their loan at any given time without paying any penalty or fee. However, borrowers on a fixed rate of interest must pay a penalty. Further, your new lender will charge you a home loan balance transfer fee. The home loan balance transfer fee varies between .5% to 1% of the total remaining home loan amount. Before opting for home loan refinancing, borrowers must use a home loan refinancing calculator to figure out the home loan refinancing cost and fees. They should go ahead with the balance transfer only if the new housing loan interest rate is low enough to help the borrower cover all the costs involved and still save some more money.

4. Keep All the Documents Ready

You may think that since you are only applying for a home refinance and not a new home loan, your lender will not need a lot of documents, but the reality is that each home loan refinancing application is treated as a new home loan application, and therefore, you will need to submit a lot of documents. Your new lender will ask you for KYC and income proof documents. You will also have to retrieve all property documents from your old lender and submit them to your new lender. To experience a completely stress-free and hassle-free home loan refinancing process, prepare a list of all the documents you will need and keep these documents ready with you.

5. Check Your New Lender’s Home Loan Eligibility Criteria

All lenders have strict home loan eligibility requirements. Lenders set these requirements to make sure they are only lending money to borrowers who can repay the loan. Lenders are therefore quite strict about borrowers meeting all the eligibility requirements. If a borrower fails to meet the set home loan eligibility requirements, their loan application gets cancelled.

Therefore, before applying for a home loan balance transfer, go to your lender’s website and understand their home loan eligibility requirements. Go ahead with the loan application only if you meet the qualifying criteria; otherwise, your loan application might meet with rejection, which in turn, will cause your credit score to go down.

Disclaimer : The above is a sponsored article and the views expressed are those of the sponsor/author and do not represent the stand and views of The Tribune editorial in any manner.