Home loan structuring versus Home Loan Refinancing

Is it possible to save more while having an outstanding home loan in India? Savings after a home loan application depends on how you structure and finance your home loan. Therefore, the short answer is yes; you can save more with your home loan.

Let’s first understand how home loan structuring and home loan refinancing can help with this –

Difference between Home loan structuring Home loan refinancing

Home loan restructuring and refinancing are two separate concepts. They can help you overcome financial crises. They may also help you save more on your existing home loan. However, you may need to consult an expert before choosing between home loan structuring and refinancing.

What is Home loan structuring?

The structure of a home loan refers to its constituent parts: the amount, interest rate, repayment, etc. Home loan structuring offers the home loan terms as settled with the lender. A lending institution creates the home loan structure by assessing the needs of its clients. Thus, a lender tailors the home loan structure to suit your needs as a borrower.

Making changes to home loan structuring impacts your finances. It’s best to consult experts before taking any major step. We, at Andromeda, have prepared a list of its pros and cons to help you with your decision:

Pros

• Restructuring your home loan gives the borrower an alternative during financial crises.
• Altering the home loan structure gives you more flexibility with home loan repayment.
• You can also change the EMI structure and reduce the financial strain.

Cons

• It may impact your overall credit score.
• Home loan restructuring may lead to additional charges.
• There might be an increase in the home loan tenure.

What is Home loan refinancing?

Home loan refinancing means you are paying off your old loan and replacing it with a new one. It allows you to negotiate better home loan terms with the lender and thus helps you save more in the long run.

However, home loan refinancing also comes with its pros and cons.

Pros

• You may get a better deal with lower interest rates.
• You want better service or better terms for your home loan.
• Home loan refinancing also allows you to borrow more.
• You want to switch from a fixed interest rate to a floating or adjustable rate.

Cons

• Home loan restructuring may incur closing costs.
• It can negatively affect your credit score.
• It may lead to a longer loan tenure.

Furthermore, both financial and non-financial factors also contribute to your decision. You should consider processing fees, the timing of the refinance, etc.

Home loan structuring versus Home loan refinancing: Which is better?

Both home loan structuring and refinancing make sense when you have a better deal. For instance, you find a new lender with better terms for your home loan. Or, you realize you save more by changing the home loan structure. In any case, you should do your homework on home loan terms and lending institutions, including NBFCs.

Can they help you save more on your home loan? Yes, but it depends on how well you negotiate the terms and conditions of your home loan. It helps to understand the value of the property.

Choosing between home loan structuring and home loan refinancing is a personal choice. It depends on factors like your current assets, existing loans, etc. It’s best to consult a loan officer before you make any decisions regarding your home loan.