Sunday, March 28, 2010

What is refinancing?

Where do you see this?

In finance articles and websites relating to home loans.

What does it mean?

It is prudent to review your home loan once in a while by checking on the available loan packages at your existing bank and those of other lenders.

You refinance when you switch to a new home loan either with your existing bank or another bank. And when you switch to a new loan with lower interest rates at your existing bank, it is also known as re-pricing or conversion.

Why is it important?

The objective of reviewing your home loan is to see if you can get a better deal by refinancing. There are several considerations, including the penalty that is imposed if you are still in the lock-in period.

You may also incur a fee for terminating your existing loan.

Most banks will want to keep their customers, so ask your existing bank for re-pricing options before checking with other banks.

To help in your decision-making, obtain an updated repayment schedule for your current loan package and compare it with those of the refinancing packages you are considering.

Check the interest payable.

So you want to use the term. Just say…

‘I was advised to read the terms and conditions and understand what the new package offers before refinancing my home loan.’

Source: Sunday Times, 28 Mar 2010

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