Skip to main content

Refinancing of Home Loan or Housing Loan

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

Many of us are in a hurry to take that home loan. As long as we can repay the home loan All Is Well. What happens when we cannot pay back the home loan? What happens if I lose my job or if I am faced with a sudden illness and I am unable to pay back the EMI? Is this the end of the road for me? If any of you have had such as experience what would be your response .Would you have panicked?

 

It would be good to remember that this is not a rare situation. Here banks have customers who do default on their loans as well. Here it is in the best interests of the bank to restructure your loan, as if it fails to do so it would increase the bank's nonperforming assets. Which bank would want to see an increase in its NPA? Remember every cloud has a silver lining

 

How To Refinance Your Home Loan:

·         So what should you do under such circumstances? Let us consider that you are temporarily not able to settle your EMI due to a sudden illness. You should then approach the bank in order to restructure your loans. Let us say that you are paying an EMI of INR 8000 for 10 years, then the bank may restructure it for INR 7500 for say a slightly longer tenure. Here the bank would not lose money as you would repay the amounts over a longer period of time. You are able to get that highly needed breathing space maybe at a slightly higher cost. Everyone is a winner in this case. If you are stuck in such a situation negotiation with your banker is the best approach.However it is best to follow the prevention is better than cure approach by setting aside say 6 months of EMI installments in a highly liquid fund for sudden emergencies.

 

The Balance Transfer (Switch Your Home Loan Option):

What is Home Loan Balance Transfer?

·         Here Home Loan Balance Transfer is a refinancing option to get the existing home loan in one bank transferred to another bank in order to avail the benefits of a lower interest rate.

 

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

 

Why Should You Opt For A Balance Transfer?

·         Here the existing home loan is set at a very high rate and despite discussions with the existing lender or bank there is no response. Here banks may not want to consider the negotiation options available to them and under these circumstances we might need to act in order to protect our interests.

·         Here at the time the loan was first taken the options were limited. Now there are vast number of options available to us. We can avail of these options by using the home loan balance transfer option. Here the banking sector has undergone vast changes and we can tap into these benefits in order to avail loans at cheaper rates.

·         In many foreign countries after 3-5 years it is very common to refinance ones home loans in order to tap into the benefits of obtaining loans at very competitive interest rates due to prevailing market conditions. This also helps to pay off home loans faster.

 

Using The Balance Transfer Option As A Bargaining Chip :

·         Let us consider the case in which the bank has reduced rates for new borrowers. You are an existing borrower with a high credit score. Here you can approach the bank using the switch your home loan option as a bargaining chip in order to secure a lower rate from the bank.

·         Let us consider the case in which we have taken a loan of 15 Years tenure. We still have about 10 years of repayment left. Here the new interest rates offered are 1% lower than the rates offered by our bank. Here we have the Balance Transfer Option where we shift the outstanding loan from our lender to the cheaper lender. Here the new lender will check our repayment history and it is necessary to keep the EMI statements handy.

·         Here as per the RBI circular all banks have waived prepayment penalty on floating rate home loans .Some of the banks have also waived prepayment charges on fixed rate home loans. Another important factor we need to note is the Foreclosure charge. These charges apply when a borrower wants to switch his loan from the existing bank to another bank offering lower floating rate of interest or if the person wants to shift to a lesser rate within the same bank. Here the RBI has directed banks not to levy charges for foreclosure of home loans taken on floating interest rate basis. As per the Damodaran Committee report the various banks did not pass on the benefits of lower interest rates to existing borrowers when the rates fell. Such rates were offered only to new borrower's .Such a practice combined with foreclosure charges prevented existing borrowers from enjoying lower rates with the same bank or switching to a lower rate in another bank.

·         Banks charge around 0.5% -1% of the total home loan amount applied for as a processing fee. It is possible with hard bargaining with the new lender to bring this down or in some cases even waive off these home loan processing fees. Here it is right to remember the phrase 'Strike When The Iron Is Hot'

 

Drive A Hard Bargain:

·         Here it is good to drive a hard bargain by talking to the existing bank. Here we can meet the bank and state the reason for the switching of the loan. Here we state that the current floating rate is too high and I would like to lock- in a lower floating rate due to my urgent financial commitments and I would like to retain the loan at the same bank rather than shift to another lender. Then settle for a round of discussion and negotiations.

·         Here if we get a better rate in another bank we would like to shift our loan to this bank. We would require a letter of consent from the existing bank to give the go ahead to shift to a new lender. Here you need to make sure that you get the necessary foreclosure statements, account statements and the list of property documents from your existing bank.

 

Keep Your Powder Dry (Always Look Out For Opportunities):

·         Here when opportunity strikes we need to seize the moment .It is prudent to look around and lock-in the best possible interest rates using the Balance Transfer option. Here a change in the interest rates by even say 0.5% is quite significant over a vast sum such as INR 50 Lakhs. Here Mathematics might not be the favorite subject for many of us, but a little homework here can save us thousands of rupees.

·         Here we need to be aware of the lock in period of the home loans. Here banks have a loan disbursement date when they release the payments. For completed buildings this may not be an issue .For an under construction building the bank will disburse the loan in stages. It might take 2 years for the house to get constructed. Here we need to check when the disbursement dates are drawn. Is it drawn when disbursement commences, as disbursement is in stages or when the bank has fully completed the disbursement of the loan. This is very important to avoid loan penalty when refinancing the home loan .

·         Do not seek additional sources of credit when your loan is being refinanced. If you require a new car put it on hold until your home loan has been refinanced. Here we need to set priorities in life. There have been cases in which refinancing of home loans has been scuttled because of poor credit scores. This is like jumping into a river with weights tied around your neck.

·         Never Change Horses Midstream: Changing of jobs while refinancing of your home loan is like changing horses in the middle of a stream which might result in your drowning. Here we might get a lesser paying job which might scuttle the whole balance transfer process. Here if the pay increases then we might have missed a better home loan balance transfer opportunity or at the very least the whole tedious process might have to be repeated as you might have to resubmit income statements

 

Here I would like to end this article with the saying 'Anyone can do something when they want to do it. Really successful people do things when they don't want to do it'. Here in order to refinance our loans we have to take effort

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Income Tax Basics for beginners

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Tax is a compulsory payment made to the Government, but there are ways to optimise it   Income tax is an instrument used by the government to achieve its social and economic objectives. Simply put, tax is duty or tariff that income earning individuals pay to the Government in exchange of certain benefits such as law and order, healthcare, education and a lot more. With proper planning, your tax liability can be reduced and optimised effectively, leaving you with a greater share of your income in your hands than being paid out as tax. Income earned in the twelve months contained in the period from 1st April to 31st March (Financial Year) is taken into account when calculating income tax. Under the Income Tax Act this period is called the previous year.   ...
Read more

HDFC Prudence Fund

Best SIP Funds to Invest Online   HDFC Prudence Fund is now HDFC Balanced Advantage Fund HDFC Prudence Fund (HPF ), the country's largest equity-oriented mutual fund scheme with assets close to Rs 37,000 crore, will now be known as HDFC Balanced Advantage Fund and can switch entirely between equities and debt. Until now, it could invest only 40-75% in equities. On 25 April, HDFC Asset Management Co. Ltd announced plans for many of its schemes, as part of the ongoing merger and re-categorisation exercise. Most other fund houses, too, have announced their plans to re-categorise their schemes. If you don't agree with your schemes' new form, you have a chance to exit without paying an exit load. Here's how you should decide what to do. Your scheme could change... If there is no change to your scheme, you have nothing to worry about. But if your scheme is about to change, check how big or small it is. For instance, if you own a large-cap fund th...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now