Since childhood, everyone has a dream home in their mind, but financial troubles keep people from buying that home. The best way to get your dream home is to depend on home loans, but with the increasing interest rates, it becomes difficult to pay those EMIs each month. That’s where the refinancing option comes in—you can calculate the interest and each month’s payment and the total payment period using a refinance home loan calculator. It is an easy way to calculate the expenses for the future and make the decision in the present.
This article will help you learn the benefits of refinancing your home loan and using the loan calculator to estimate the payments and monthly EMIs. Read on if you are planning to buy your dream home soon.
What does refinancing your home loan means?
The term ‘refinancing’ means availing of a new loan from another bank or financial institution to pay off the present one (loan). The two significant reasons for refinancing/switching a home loan are:
- To avail the benefits of a low-interest rate
- To get a top-up on the original loan amount
There are some more reasons why people choose refinancing, but these two are the primary reasons; besides, if these two issues are taken care of, the remaining problems will be minor ones for the person.
How do you calculate the loan amount, interest rates, and payment tenure?
Calculating the tenures, interest rate, EMI amount, etc., are easy when you have a loan calculator. They turn out to be advantageous in many ways, such as:
Advantages of a refinance home loan calculator are:
- Easy calculation
- Can choose the suitable tenure
- Good for loan management
- Can compare loans offered by different banks
- Accurate results
What are the benefits of refinancing your home loan? Should you do it?
Refinancing your home loan will benefit you in several ways. It does not just take off a massive weight from your shoulder; it makes it easier for you to manage the EMIs by offering various schemes—and you can pay off the loan in a more extended period without financial struggle.
Saving on interest cost
This is the significant reason why people opt for refinancing their home loans. Shifting the loan to a new lender will help you decrease interest rates.
Some lenders reduce the interest rate until the last EMI, and some will increase interest rates halfway through the payment tenure.
Opportunity for additional loan
You can opt for incremental funding (or top-up) at the current home loan rates and refinance the loan. For example, Mr Scott took a $400,000 loan for buying a $500,000 property five years back. After paying the EMIs for those five years, the loan value must have come down to $300,000, but the house’s value has increased to 1,000,000 (1 million).
Now, Mr Scott can get a home loan of up to $800,000 on this property. But, Scott cannot avail of the total amount as a loan as he still has an outstanding loan of $300,000. This outstanding amount must be cleared before he applies for any other loan. This is when the refinancing method helps him—Mr Scott can get the loan refinanced from another lender to transfer the $300,000 outstanding amount at a lower interest rate, while he still receives incremental funding of $ 500,000(800,000-500,000) at almost the same interest rate.
Better service
Refinancing from a lender with good customer service will be far better than sticking with a bank that changes the interest rate according to inflation. The banks usually charge high-interest rates when the economy changes, but the lenders will offer you multiple schemes, and the economy seldom affects your EMIs.
Some of the other benefits of choosing loan refinancing are:
- Lock in a fixed interest rate
- Can pay off the loan in advance if you want to
- Get funds for home refurbishing and repairs
