In recent times many people are availing loans from a new lender to pay off their existing home loan. There are several factors behind this trend but primarily people are opting for refinancing home loans because of the lower interest rate or to avail the facility of top-up amount on the existing loan amount.

Here in this article, we have tried to give an insight into the benefits of refinancing home loan that has compelled many people to opt for refinancing:

• Pay lower interest rate: The most common and obvious reason for refinancing yourhome loan is to pay a relatively lower interest rate. If your current bank is offering loan at a higher rate of interest in comparison to any other bank in the market, then without any second thought you will prefer to switch the loan to the bank offering lower interest rate.  Also, few banks opt for a fixed rate of interest and do not increase or decrease the same as per market norms. This policy is beneficial in the increasing interest rate scenario, however, if the situation is opposite and declining interest rate scenario is more prevalent then the customer is bound to refinance loan to avail better rate of interests prevailing in the market.
• Avail additional loan top-up: While refinancing your home loan, you always have an option of availing top-up facility as well, however, it may be difficult in the existing bank. E.g., If someone has taken a loan of 30 lakhs to purchase the property worth Rs. 40 lakhs, and after one year if the rate of property gets appreciated you will not be able to take a loan on the existing value of the property till the time you pay off the outstanding loan amount. In such a scenario people pay off an existing loan by refinancing their existing home loan and avail top facility on the same property on its appreciated value.
• Better customer services: Another benefit of refinancing a home loan is to opt for a bank that provides impeccable customer services. At times the bank from which you have taken a loan doesn’t provide quality services and are usually not supportive in answering your queries and doubts, in such situations it is always better to switch the bank by refinancing as in long term such unsatisfactory services may hamper your relationship with the bank and will leave you vulnerable.

Change in paying capacity: Over the years the income of a person usually increases, but there are scenarios where due to additional expenses one may not be able to pay as much amount of instalment as they were paying earlier. By opting for refinancing one can increase the tenure of the loan while decreasing the monthly EMI’s. Such facilities are usually not available on the existing loan, one cannot increase the tenure and at the same time cannot even decrease the amount of instalment to be paid every month.

Looking at such enormous benefits of refinancing a home loan, we are sure that you are convinced enough to refinance your home loan as well.