Most of the people don’t know that take can change their loan to other investor; others are simply dismissive. They simply become firm with their first lender but they don’t know that it could bring higher interest rates. Because of increasing number of housing loans and amortization period, the interest can range from thousands to hundreds of thousands of money. Below are some considerations when reinvesting your home.
Latest Interest Rate
When your current interest rate is higher than available housing loan packages on the market, it is time for you to consider reinvesting. Ask your bank or financial institution to reprice your loan package. Your lender might give you an offer. Make a comparison between this offer and with offers from other lenders to see whether you should switch or stay put.
Lock-in and Clawback Time Periods
Lock-in period is when your lender give you a penalty if you want to fully repay your loan. Most of housing loans have a clawback period wherein the lender will claim back “giveaways”, such as legal subsidies, that they “gave” you when you take up your housing loan. Lock-in period is different from clawback period. Thus, it is not advisable for you to reinvest due to these extra costs.
Loan Quantum
The higher the amount of your loan, the greater your savings for the same decrease in interest rates will be. Yet fixed cost to reinvesting does not vary much with quantum loan. The difference between your current and reinvesting interest rates has to be larger for a relatively lower loan as fixed cost takes into a more significant part of your interest rate savings.
Distinguish Interest Rate Movements
Analyze how interest rates flow. If you are currently on a fixed rate package and believe interest rates are dropping, you may want to reinvest to a floating rate package. Conversely, if you are on floating rates and believe interest rates are increasing, switching to fixed rates may be a good choice.
Personal Financial Evaluation
Think of reinvesting when your financial states change. Give some thought to take fixed rate package. Consider increasing your loan quantum. On the other hand, if your monthly income has increased and you want to lower interest payments, think of reducing your loan tenure.
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