What are the refinancing aspects you need to consider?

If you are getting flexible terms & conditions, easy EMI, and lower interest rate, what could be better than refinancing your present home loan? The choice of the lender entirely depends on you. You can ask your previous lender or you can select a new lender with the best refinancing rates. Borrowers who have a loan with more flexible payment terms can save interest over the long-term. Before you decide on refinancing, we ask you to consider some basic facts. The facts are a few basic questions that you need to ask yourself.

Do you need refinancing?

Refinance your home loan and you can pay off your existing mortgage. With refinancing, you will get some advantages. Refinances are often done for a variety of reasons, including a lower interest rate, shorter term, lower monthly payments, and lowering the monthly payment. Every reason for refinancing has its pros and disadvantages.

Your current debt-to-income ratio

Other than your mortgage, are there other sources of debt such as a car loan, credit card debt, or other types of debt? If it is the case, then they might affect your refinancing ability. When you apply to refinance, a lender will consider what is called your debt-to income ratio. Your gross monthly income is used to calculate your debt-to–income ratio.

What is your financial situation?

Refinancing of your existing mortgage will require you to show proof of income and employment status, just as you did for your first mortgage. The interest rates will rise in coming years. A higher income brings better facilities for you, such as lower interest and flexible terms.

What is the asset value?

The current value of your house compared to the amount you owe on your mortgage will determine whether it is eligible for refinance. Refinance usually involves an appraisal of your house. A refinance plan can be affected by the value of your home. You might not have enough equity if your home’s worth has dropped since you bought it. However, not all lenders require this. 


Your second mortgage can make it difficult to refinance if you have additional loans. While a home equity loan or credit line will not stop you refinancing, it may complicate matters. The holder of the second mortgage can take over the primary mortgage’s spot if you have paid off your first mortgage. Refinance is possible only if the homeowner of the home equity loan agrees to allow the lender to take over the primary spot.