Refinancing of home loans refers to the process of availing of another loan to set off your existing loan against the property. There are multiple reasons why you would want to refinance your loans. Some of the common reasons are – finding another loan at a lower interest rate, or the need to alter the tenor of an existing loan, preferable covenants, lesser security or mortgage, etc. However, these reasons are not exhaustive.
Here are some tips Loan Against Property that you can follow if you wish to refinance your loan
- Scourge the Market and Interest Rate
Due to the rising trend in refinancing, many options are available for the borrowers. You can avail of PNB housing loan against property from trusted and dependable financial institutions such as PNB financing housing finance limited that offer competitive interest rates.
Evaluate the interest quotient between both the loans and compute the economic impact of refinancing the loan.
- Maintain your credit score
Your credit score is a reflection of your financial credibility. Ensure that you always have a high credit score. A credit score above 700 is preferred. When you are looking to refinance your loan, do not apply for any other loans or default on any payments on your existing installments or bills. It will hurt your credit score and will not be viewed positively by the lenders.
- Documentation and Filing
Maintain records of all communications that you’ve had with your previous lender. File all letters, emails, records, etc. that are related to your loan. It will make the discussions around covenants and other conditions of your refinancing easier. Have an honest and transparent discussion about your existing loan with your new lender.
- Associated Costs
You must know, pre-closure of any loan has additional costs associated with it. Processing fees, foreclosure charges, etc. are some of the associated costs. Further, a new loan will also have additional costs like application fees, evaluation fees, etc.
- Tax Quotient
Additional tax implications might also arise during the process of refinancing. Hence, understand the entire cost of refinancing and not just the change in interest or tenor and take a calculated and informed decision.
- Evaluate your property : Loan Against Property
Analyze the actual value of the property that you have mortgaged. You would’ve paid part of the loan, and hence a certain portion of the property would now be freehold, and some would still be part of security. Ensure that you have all documents – floor plan, map of your property, etc and continuously assist the officials while they are trying to value your property. An appraisal report assesses the actual market price of the property, and you must ensure that the official has considered the whole area of the property before submitting his appraisal report.
According to a report of Business Standard published in August 2020, due to the pandemic, followed by RBIs relaxation on the restructuring of loans, the need for refinancing loans will substantially rise.
Factors such as loan against property eligibility, credit score, income-related documents, etc. play an important role in refinancing. Consider all the above factors to ensure that the process is smooth.