Refinance Home Loan: Things to Know and Considerations

Refinance is the process in which a house owner changes the conditions of a home loan, usually to get lower interest rates than the ceiling or to adjust the repayment period, which may be beneficial to their finances. However, refinancing may not be appropriate for everyone either because there are many factors to consider before making a decision. Today, ACU PAY will bring everyone to know the details and considerations of refinancing.

What is a Refinance Home Loan?

Refinance of a home loan is to close the existing home loans with new loans from other financial institutions or existing ones with the changes of loan conditions such as interest rate, repayment period, or types of interest (fixed or rollover). The refinancing can reduce the total interest payment or adjust the loan agreement to suit the current financial situation.

Advantages of Refinance

Reduce interest rates: Rather than allowing interest rates to rise from a fixed rate of 3% to 4% in the following year, refinancing will allow interest rates to be reduced to 2.75% or less, depending on the policy of each bank.
Shorten the loan period: Refinance may allow you to shorten the repayment period, which may help you get out of debt faster.
Adjust conditions: The repayment can be adjusted to provide flexibility in line with demand, as well as increase the ability of borrowers to repay.

Cautions and Factors for Consideration

Fee and expenses: Refinance often includes fees and related expenses, such as house appraisal fees, document processing fees, and loan management costs. These fees may make refinancing in some cases unworthwhile.
Return of capital period: You should consider how much money you can save in comparison to the total cost if you decide to refinance. Refinance may not be worthwhile if you have to pay a high initial cost or plan to sell your house shortly.
Changes of interest rate: If you choose floating interest rates, interest rates may increase in the future, which may also increase your debt repayment.
Impacts on credit history: Refinance may affect the credit of your loan application, depending on the loan management and repayment during the process based on whether it is done as well as it should be or not.

How to refinance a home loan

Assess your financial status: Check your finances, such as income and liabilities, to make sure you can handle new repayments.
Search for loan options: Compare offers from banks and financial institutions to find the best one for you.
Check fee and conditions: Read the details of the fees and terms of the refinancing thoroughly.
Apply and prepare documents: Apply for refinancing and prepare necessary documents such as personal documents, financial evidence documents, and home refinancing collateral documents.

Refinance a home loan is to take out a loan from a new bank, pay it to the old bank, and start paying back to the new bank for cheaper interest. Normally, in the first 1-3 years of borrowing, interest rates are lower than existing banks. Many people choose to refinance to reduce the burden of expenses. The step to refinance is not complicated. Starting from reviewing existing loan documents, finding banks with cheap interest, good terms, filing, and re-contracting, and done! You can refinance your home. However, you should consider the costs and conditions carefully to ensure that your decision meets your financial goals.

References from
prachachat / NerdWallet / apthai