Simple Interest Calculator | Do Your Math Before You Change Your Home Loan!

by BankBazaar.com Desk on 30, May, 2011 29060 0 style='display:none' id='IDCommentPostInfoTitle29060'>Do+your+math+before+you+shift+your+home+loan%21 2011-05-29+23%3A40%3A44 admin

Does it make clarity to lower a weight by receiving on another? This is the initial subject that would be tip of thoughts when faced with the subject of either to refinance an existing home loan. Given the fact that a home loan is the greatest reason for money outflow in many Indian households, this preference has to be taken after a lot of thought. Here is a few food for think to help you arrive at the most appropriate decision.

Refinancing a loan can give multi-part benefits depending on the incident of your stream personal finance

- Get you a lower interest rate thus shortening your EMI and monthly burden

- Give you the choice to go for lower tenures and be out of the weight soon

- Reduce your EMI by going in for longer tenures

- Shift from a Floating rate to prearranged rate or vice-versa depending on interest rate trends.

Wow! With so many benefits, we should right away go and refinance my loan! On second thoughts, should I?

All home loan customer will consent that it is a paper work installed routine to obtain the loan, as all the formerly procedures have to be steady afresh. Add to this the many levels of tiny print and slang and it gets more confusing. This a fact alone can difficulty you whilst determining either to go for a refinance or not. Here are a few information to help you take the decision.

Refinancing refers to the deputy of a loan from a entity, with a new loan from other to be able to earn a few benefits. The word refinance even though could appear a bit difficult as there is no compliance on your aged loan but you simply take a new loan to be able to pay back the aged one.

How do we know if "my" incident warrants going in for a refinance?

The essential at the back every personal financial preference has to be money flow. This same element needs to be practical to your decision. Life is a lot easier with online collection straightforwardly available. A elementary "refinance calculator" finding will give you a few great tools, that will help you know with clarity as to how sufficient obtuse or how sufficient more you will pay by determining to go for refinance.

These calculators have multi-part options to try out every scenario. You can select your tenure, interest rate etc and find out the outflow for any scenario.

Refinance – Yes! When? -If any unfolding gives you a certain saving of over 15,000/-, then that would be the preferred choice. The Rs 15000 benchmark is to casing up all the diverse expenses that will be entangled inclusive your time spent.

Refinance – Maybe, When?- Taking a refinance to obtain a lower EMI at the cost of a aloft net outflow may be toxic in the long tenure as you will have to pay more interest (negative cash) over the period. But it moreover depends on your stream aptitude to service the loan. If you feel that the money saved every month on a obtuse EMI can help you lead a improved life, then it could make sense.

Refinance- Never- When? If the refinance is going to outcome in a net outflow of more than 15% of the outflow of stream loan, it is improved to stay away from the refinance.

How Aparna took her preference concerning Refinance?

Aparna had taken a home loan of Rs 2,5,00,000/- for a 25 year tenure at a prearranged rate of 14%. She had already paid the EMI continually for 5 years when, she happened to go to a loan mela. Dinesh, a sales executive offering her a refinance at an interest rate of 13%. The offer of 2% obtuse amalgamated with the fact that her EMI would be obtuse done Aparna think of the offer seriously. She met her personal financial confidant to take an sensitive preference utilizing an online calculator (refer impressive alongside).

Aparna's stream leading excellent was Rs. 24,20,066/- this was the amount that Dinesh was ready to account as a new loan.

Aparna had 3 choices:

1. Lower rate, 20 Years tenure (Lower EMI) " from the calculator she could see that if she reduces her EMI by around Rs.1700 every month and moreover saves Rs.2,99,257 in interest over the next 20 years.

2. Lower rate, 15 year tenure (Higher EMI, Lower months to pay) " This results in a borderline enlarge of Rs 526/- but saves her Rs 15, 92,377/- over a time of 15 years.

3. Lower rate, 25 year tenure (Lower EMI) " This results in shortening the EMI by Rs 2800 but an additional interest outflow of over Rs 10 Lakh.

Aparna's Choice: Based on the calculations Aparna and her financial confidant motionless to not usually take the refinance choice but moreover to go for a lower tenure.

Next time you are faced with a identical preference creation routine all that you must be do is to just go online and do the math for yourselves.