2020 brought many changes in the lives of every person. Mostly it created trouble for small business owners and people who lost their job because of the unavailability of work. The direct effect could be seen in the quickly exhausting savings of people and their inability to repay the loan which they had borrowed before the Covid-19 pandemic started.
But the year 2020 benefited those people who wanted to invest in the real estate sector. It was a great year for the people who took loans to purchase homes because the year saw a drop in the interest rates on the home loans. Many people who were already repaying their previous home loans got some very interesting deals after switching to other banks. For faster and effective results you can also make use of a home loan prepayment calculator.
Here are some of the smart moves that home loan owners took to save their money.
Refinance to Get Lower Interest Rates
Business is all about making good relations with other people. When people take a loan from one bank, oftentimes out of good business relations, they go to the same bank in case they again need a loan. For the repayment of their second loan, banks still charge a high-interest rate, close to the number at which their previous loan has been sanctioned to them. But what they don’t know is that people who are taking home loans for the first time today are getting lower interest rates than before.
Staying with the previous lender and paying higher interest rates is not a good deal at all. Some people call it a “loyalty tax’ for choosing the same lender.
However, some second-time borrowers approached the same bank but demanded lower interest rates for the home loan to respect their old business relations. If they get it, then it’s okay. If they don’t, then they should move to other banks, because after all, it’s about saving money.
The potential to save extra money on Home Loans
Another thing to point out about the interest rates is that people, who are repaying their older loans, do not ask banks to lower the interest rate after seeing the changes in the market. They still pay the interest rate that was agreed to them for the 4-6 years old loan. But remember, the older the loan, the bigger the potential savings could be.
The home loan owner, who has a tenure of more than 10 years to pay their home loan, can save a big amount of money after the refinance. They can ask for their lending bank to lower their interest rates, or they can also go to other banks that agree to offer them lower interest rates.
By just lowering the interest rates on home loans that have a big tenure, you can save a significant amount of money over the period. The money you save is equal to the money you earn.
Getting Cashback after Refinancing
The benefits of refinancing are not just limited to interest and regular repayments. To attract more and more loan borrowers, lenders give exciting offers that can save a large amount of money in the borrower’s pocket. Getting cashback is one such offer that banks use to attract customers.
After refinancing your home loan, you can avail the benefit of cashback by the bank and can save a large sum of money quickly.
You should also note that refinancing does not only cut the costs of loans but also play an important role in achieving your personal goals. For example, after saving extra money in your pocket after refinance, you can:
- Invest money somewhere else or buy something useful
- Streamline your money matters
- Access home equity for renovations and home improvements
- Use the money to invest in rental property, go on a vacation, or pay for your child’s education
Everyone should always look to save money. Purchasing a home is always a big step that requires a big amount of money. If you have taken a loan to purchase a home and you are paying huge interest for its repayment, you can think about refinancing which can help you to save a large amount of money.