Home Loans Refinancing

Financial issues are the major concern of most of the people as they have developed a practical outlook towards the loss and gains in every transaction that they carry out in their daily life. The practical outlook has made them realize that they can save lots of money if they adopt a little discretion while managing their finances. In this context most of the people have realized the fact that it is profitable to purchase a house than to live in a rented house.

1. What is the advantage of owning a house rather than living in a rented house?

It is advantageous in owning a house than living in a rented house because if you own a house you save the money that you have to pay as rent every month. Moreover you have the liberty to build and decorate your house according to your choice and use all the ideas that you have of your dream house. It is true that you might be thinking about the huge investment that you have to incur while purchasing a house. But nowadays there are many banks and other financial institutions which offer home loans so that you can easily purchase a house and in the process acquire an asset for yourself. The other vital financial benefit that you get is the tax saving facility as you get full deduction on the repayment amount of the home loan. Moreover the repayment amount will not affect your daily budget as it can be adjusted with the house rent allowance which you receive and would have paid as rent if you lived in a rented house.

2. What will you do if your repayment amount exceeds the total amount that you receive as allowance?

In this type of situation you can always take the help of home loans refinancing which is a very common procedure nowadays. This will help you to reduce the monthly amount that you have to repay for the loan that you have taken for building your house. If you reduce the term of the repayment it will help you to save a lot of money as you can pay off the loan within a short period and gain total possession of the property which will help you to get more value for your house when you want to sell it.

3. When should you think of availing the facility of home loans refinancing?

This is a very crucial point as you have to take into consideration many factors before you finally decide to go in for home loans refinancing. Previously it was believed that refinancing should be done if you get a loan which has at least two percent less rate of interest than what you are paying. But practically speaking only this criterion is not enough for indulging in home loans refinancing. There are other factors that you have to keep in mind before refinancing which will affect your refinancing. These factors are the type of interest rate that you have to pay after refinancing, the period of repayment and the most important factor is for how long you are going to reside in that house so that you can obtain that point where you can get a break even.

4. You might be thinking that how do these factors affect the decision of taking up home loans refinancing?

The answer is very simple; if you have taken a home loan which has floating or variable rate of interest then you can think of refinancing by opting for a loan with a fixed rate of interest. This will be helpful if the term of repayment is long as your repayment amount will be fixed and the fluctuating market rates will not affect your repayment amount. But if you have taken a loan with fixed rate of interest and want to write off the loan amount within a short period of time and find that the variable rate of interest is lower then you should refinance your fixed interest loan and go in for the variable rate of interest.

5. What are the other factors and how do they affect the decision of home loans refinancing?

There are several other factors which you have to consider while refinancing and those are the mortgage term which means the time you will require to pay the entire amount of the loan that is the principal amount and the interest. You may find that in short term loans the monthly installment may be high but in the long run it will be a saving as it will help you to reduce the cost that you pay as interest. You should also take into consideration the added expenditure that you will have to bear as mortgage fees when you opt for refinancing as you will have to pay all the charges while going through the procedure of taking a new loan for refinancing. So before going in for home loans refinancing you should take the advice of an expert so that you can get the best deal and increase your saving.