Refinance Home Loan
Refinance Home Loan: The most of banks and financers are providing refinances on you existing home loan. They feel there is less risk for refinancing to the same person who has proven records of financial transaction with them. So going for a refinances home loan is the best idea if you need for remodeling and modification of your houses etc. You may apply for the refinance loan if you feel one more house keeping the existing one also. A financial advisor, a bank agent or a consultant can help you for a more knowledge.
Of course, there is less time for processing of the refinance but still there are certain criteria are to be followed up. The papers and evidences should come to the financers for a fast loan sanction. There are still some mandatory testimonials as potential causes make of a fast re-loan sanction. When you are planning to get a refinance you should go for a detail analysis on pros and cons.
The Eligibility of Applicant:
The record shows the sincerity of the candidate. The record indicates the status of the previous loan and remaining balance due from the customer. There is an award for every good achievement. So the good and regular payer must be rewarded by the banker getting one more loan at the time of need. Of course, the renewed personal profile should be submitted along with the application. Banker looks into the past, present and future from the personal profile. They can see the person’s present occupation, family background (liabilities), other members’ capability and ethics of the person towards honesty etc.
Earning Life of the Applicant:
The banker definitely looks into the present earning, and can make out the capacity and longevity of payment mode of the candidate from the current occupation, whether servicing, doing business or in consultancy job. The bank offers certain conditional sanction based on the repayment capacity.
Existing Financial Status:
The valuation of the current properties must be taken for account against the mortgage and loan coverage. They calculate the depreciation value till the days passed from previous loan. If it is still lacking the criteria, the banker may ask for more assets as mortgage. The refinance amount and the previous amount will be one volume and the total project will go on for the term decided.
The Purpose of Refinance:
banker understands the reason of the amount needed by the customer.
So a minimal discussion and right documents should be submitted to fulfill
the initial approach for the refinance. When you apply for a refinance
home loan, you must have a proposal of the refinance and have to produce
before the manager. If you go for additional house purchase again you
have to show the offer letter from the seller.
During the refinance processing the documents may be asked less than the first time. The
documents like resume of personal profile, estimation of repairing or
modification of house, legal aspect documents, photograph of the current
house suppose to be deposited.
Whatever you say and show documents to the bank, the banker must verify the reality during a field visit. The investigation team verifies the physical condition of the house, modification required or emergency mentioned, the legal aspects if lying. This is a final step towards the refinance.
The loan type may continue or can be switched over from the option of switching to other loan. The current rate of interest will be applied according to your desired type of loan or switching over from Floating and Fixed loan or vice versa. If you go for the fixed loan the interest rate will be fixed for the entire term period. And if you go for a floating loan the interest rate will be changed may be hiked or reduced in later years according to policy changed. The margin money may be asked if the total term loan exceeds the eligible amount or if your mortgage is not sufficient as of required.
Loan Amount and Repayment Amount:
As per the estimation and the verification reported, the amount will be decided for a refinance. And the financer sanctions the loan if all criteria go well. The repayment structure is remain continues if it is decided or may be changed. The Equated Monthly Installment (EMI) is a fixed amount calculated on the capital and interest. This is applied maximum up to 45% of your take home amount per month. This amount can be calculated towards your income tax benefits.
If the customer wants to continue with the predefined term or can close within the same period. The loan terms are with options: 0 to 5 years, 5 to 10 years and 10 to 20 (or 25 or more) years term. The rate of interest is also decided on your term decided.
Switching of Home Loan:
During refinance, you have choice of switching over your loan type from fixed to floating or vice versa. If you experienced that you are loosing more with your current market rate of interest, it is advisable to switchover.
Generally a home loan has closing costs or settlement charges as they are more common in the mortgage industry. These costs include:
• Origination fee (usually 1%)
• Discount points (to bring down the interest rate)
• Lender fees
• Title insurance
• Pre-paid and reserves (tax and insurance)
• Recording fees
• Appraisal, Inspection and Survey Fees.
A refinancing home loan is not good idea if you have been paying the same mortgage for 30 years or such. The result will come with a lower monthly payment. So you can consider for 10 years or such. And every decision should come with well studied topics.