Refinancing a home loan means, transferring your existing home loan to another lender to pay off the existing loan. There are different reasons why people choose to refinance their home loan.

Pros:

  • To get lower interest rates: This is one of the common reasons why people decide to transfer their home loans. A customer paying high on interest rates would want to naturally want to transfer his loan to a lender who is providing him/her the loan at a lower interest rate. With lower interest rates, their EMI costs would be reduced

  • Flexibility of tenure: You will have the option of either lowering your tenure or increasing it. You can lower your tenure period to pay off your loan quickly. However, if you feel you want longer tenures, you can request your lender

  • Getting top-up loans: The customers present lenders might not provide top-up loans, so might consider for a switch. A top up loan is getting additional funding on top of your home loan

  • Changing from floating to fixed or vise versa: Customers might be paying a higher floating rate of interest and thus might be interested in moving to a fixed rate home loan. On the other hand some customers paying higher rate of interest on a fixed rate home loan would want to move to a floating rate home loan at lower interest rates

Cons:

  • Credit score matters: If there has been any change to your income or credit score since applying for your original home loan, this might affect your chances of qualifying for a refinance. In case you have a poor credit score, you might not get the low interest rates or the flexible tenures you were looking for

  • Refinancing costs: You will have to pay additional charges if you want to refinance your home loan. These additional costs might come near 3% to 6%