Home Loan Refinancing in India

Home Loan Refinancing simply means that, if you have an existing home loan, you can repay it by taking a new loan which has better interest rate and/or terms and conditions.

Why would you need to refinance your home loan?
1. Interest rates in the economy have dropped which is why switching from the old high cost fixed rate loan over to a new fixed rate loan at the lower rate proves profitable. You can do this provided rates have fallen enough to cover your prepayment penalty and the up front costs of initiating a new loan (like processing fee, administrative fee etc.)

2. If you plan to sell the home during the tenure of the original loan you will need to terminate the loan borrowing the remaining principal amount against the home equity or from the potential buyer.

3. Switch from a Fixed rate loan to a more flexible Floating rate / Hybrid product You may want to switch from a Floating rate loan to a fixed rate loan if interest rates start to move up.

4. You can lower your monthly installment payments by extending the tenure of the new loan. In order to improve your monthly cash flows you can prepay an existing loan with 5 years to go by taking a new 15 year loan for the remaining principal amount.