How refinancing your Home Loan can help you save more

The joy of owning your own space, a home you can call your own, is a dream for many. But thanks to home loans, many are able to realise this dream. But there comes a time, after one buys a home, that the satisfaction of owning your own place may be dampened by the financial burden of EMIs.

Well, what if we told you there is a way? You can let nothing take away your happiness by simply refinancing your home loan.

What does refinancing your home loan mean?

Refinancing your home loan is nothing but a home loan balance transfer. It simply means the option to switch to another lender who can give a lower home loan interest rate. With home loan balance transfer, you can transfer home loan from one housing finance company to another. Home loan transfer occurs when the entire unpaid principal loan amount is transferred to another home loan finance company for a lower home loan interest rate or to avail a top-up on the original loan amount. The financial institution that had originally extended the loan to you gets the unpaid amount and you have to, in turn, now pay your EMIs at the new rate to the financial institution that has taken up the loan.

How do you go about it?

Knowing the value of your property is essential. The next step is doing a cost-benefit analysis i.e comparing the risks versus the rewards. Make sure that the profits you earn out of the lower interest rates are more than the home loan transfer charges you pay.

What are the advantages?

Lower Interest rates:

A lower rate of interest is one of the major reasons that borrowers transfer home loan from one lender to another. For instance, an individual is paying higher interest on an existing home loan than that offered by another lender, he would naturally be tempted to go in for a new loan that brings down his total interest cost and consequently his EMI. It helps in increasing your savings due to the lower interest rates which result in lower EMIs. If you find a lender providing a lower amount of interest rate than your current lender, then you can calculate the difference in the EMI amount using a home loan EMI calculator. Once you know the difference only then take a decision to transfer the loan.

Reduce your loan tenure:

The loan tenure is inversely proportional to the EMI payments you are making. Higher the home loan tenure, lesser the EMIs, and vice versa. Similarly, the total interest paid is directly proportional to the tenure. The higher the tenure, the higher the total interest paid. One can opt to change the tenure in case of changing life circumstances like a promotion in your job, windfall gains in business which enables the person to afford a higher EMI payment and shorten his tenure, and get debt free earlier. Visit Home Loan Interest Rates page to know more.

Get additional loan opportunity:

Along with the lower home loan interest rate, one can also get an opportunity to get additional funds for registration purposes, home improvement or expansion purposes. One should only opt for a top-up of the loan if he is getting the benefits of lower rates.

Tax Benefits:

An individual taking a loan from specified housing finance companies is entitled to certain benefits and exemptions. Section 24 of the Income Tax Act states that Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. Rs 2,00,000 is the maximum amount eligible for deduction in the case of self-occupied property and for rented out property there is no limit of amount of deduction.

Diversify your investments:

You can also use home loan balance transfer to increase the tenure in order to reduce the monthly payments. This is a viable option if a better investment is found and you want to divert a part of the payments to that investment. Also read – Benefits of Home Loan Balance Transfer

Related Articles:

• Tax Benefits on Home Loans You’re Unaware Of
• Ways to Repay Your Home Loan Faster
• Structuring Home Loans & Tax Exemptions

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