Most of the people don't know that take can change their loan to other investor; others are simply dismissive. They tend to be loyal with their very first lender but they don't know that such loyalty will bring higher interest rates. Due to the amount of housing loans and the term that the loan is amortized over, the interest can ranges from thousands to hundreds of thousands of dollars. Below are some considerations when reinvesting your home.
Current 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. Go back to your current bank or financial institution and ask them to reprice your loan package. Your lender might give you an offer. Try to compare this offer to the other packages and then decide if you should switch or not.
Lock-in and Clawback Periods
When you get a housing loan, there may be a lock-in period wherein your mortgage lender will charge you a penalty fee, maybe a percentage of your outstanding loan amount, if you were 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. Because of this, reinvesting is not recommended.
Loan Quantum
If the amount of your loan is larger, the savings for the same decrease in interest rates will also be also larger. However, fixed cost to reinvesting, which comprises mainly of legal fees, does not vary much with loan quantum. The difference between your latest 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
Your analysis on how interest rates are moving can be a factor when considering whether you should reinvest. Try a floating rate package as an alternative to fixed rate package if the interest rates are decreasing. 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. Try to get a 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. - 29969
Current 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. Go back to your current bank or financial institution and ask them to reprice your loan package. Your lender might give you an offer. Try to compare this offer to the other packages and then decide if you should switch or not.
Lock-in and Clawback Periods
When you get a housing loan, there may be a lock-in period wherein your mortgage lender will charge you a penalty fee, maybe a percentage of your outstanding loan amount, if you were 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. Because of this, reinvesting is not recommended.
Loan Quantum
If the amount of your loan is larger, the savings for the same decrease in interest rates will also be also larger. However, fixed cost to reinvesting, which comprises mainly of legal fees, does not vary much with loan quantum. The difference between your latest 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
Your analysis on how interest rates are moving can be a factor when considering whether you should reinvest. Try a floating rate package as an alternative to fixed rate package if the interest rates are decreasing. 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. Try to get a 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. - 29969
About the Author:
Learn more about a premier Housing Loan advisory firm, providing Housing Loans with free mortgage broking.
