Home loan is the most expensive credit facility that anyone could get in their lifetime. Acting wisely on your house loan can save you a lot of money. A small difference in the interest rate can be in difference of few thousands or hundreds of thousand dollars. Getting a loan for your home can be tough task. If you have already served the bank for more than five years, it is good to hunt for home refinance products. Refinancing can save you a lot of money in longer run. Banks and loan providers are competition among each other to attract their competitor’s clients using refinance products. The rate should be lower than their competitor and the product should offer better services to convince their competitor’s clients.
Most of the loan facility will offer lower rates for first 5 to 10 years. This is to attract the customers. But, the flaws might be the early termination penalty fees. Why I suggest going for home refinance after five years is because of early termination penalty fees. In most cases, the fees will be 5 – 10% of the loan amount. This is huge amount to cover from your new refinance product. You can avoid this penalty fees by having the loan facility at your current loan provider for the minimum period of time. Most bankers tide up period is only 5 years and only some have it up to 10 years.
Right after 10 years, the current loan provider might lower the rates to make you stay with the bank. This is highly competitive market as you can always find cheaper interest rates from other providers. If you able to find one competitor that offer lower interest rate in the refinance kit, you have a strong reason to go leave your current loan provider. But, you can always demand to lower the interest rate from your current service provider showing the proof of their competitor’s rates. There are higher chances to get your rates to get reduced.
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