Many people are unaware that they have the option of switching their loan to other investor; others are simply uninterested. They simply become firm with their first lender but they don’t know that it could nring 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. The following factors may help you consider reinvesting your home.
Current Interest Rate
If your latest interest rate is higher than other housing loan packages, 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
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. Many housing loans have drawback period. This is when the lender will take back what they gave you when you get your housing loan. Lock-in period and clawback period are different from each other. Because of this, reinvesting is not recommended.
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 latest and reinvesting interest rates has to be larger for a relatively lower loan as fixed cost consumes into a more significant part of your interest rate savings.
Distinguish Interest Rate Movements
Analyze how interest rates flow. Try a floating rate package as an alternative to fixed rate package if the interest rates are decreasing. However, if you are on floating rates, try to switch in fixed rates if the interest rates are increasing.
Personal Financial Evaluation
Give some thought to take fixed rate package. Think of 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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