What Is Refinancing and How Does It Work?

Refinancing, ideally referred to as loan transfer is the process of transferring your existing loan account to another bank or non-banking financial institution with the aim of getting a lower interest along with better services. If you’re not satisfied with your high-cost loan, don’t lose hope as it is possible to move your loan from your existing lender to a new one and save a substantial amount of money.

Well, how does refinancing work? Well, the process of a loan transfer is quite straightforward and we are going to take a closer look at how it works in this brief post.

The first step is to initiate the transfer process by writing a transfer request letter to your current lender. Upon receiving the letter, your lender will review your application an issue a No Objection Certificate along with your payment history.

Once you get the documents mentioned above, you’ll need to submit them to the new lender, where they will be thoroughly verified to ascertain you’re capable of repaying the loan.

After the verification, the new lender will prepare for your account closure by sanctioning the loan amount to your former bank or lending institution. Once the transaction is done, your documents will be turned over to the new lender.

Since refinancing is treated as a new loan, you’ll have to undergo the procedures of technical and legal verification, along with credit appraisals which are done by your new lender. Keep in mind that when your loan account is transferred to the new institution, you will have to pay a loan processing fee. This is one of the biggest cons of refinancing as the costs can be pretty high depending on the amount.

This is generally how refinancing works. However, before you transfer your loan, there are a few important things to keep in mind:

  1. Before refinancing, ensure you go through the terms & conditions including the processing fees, legal charges, stamp duty and other fees you may encounter during the process.
  2. Try and make the transfer during the initial years of the loan. Doing this after three or four years won’t reduce your interest burden as you’ll have paid a large part of the interest by that time.
  3. Before refinancing, it is advisable to compare the interest rates offered by various lenders so that you can find the best ones. At the same time, you should try negotiating with your current lender for better terms and a lower interest rate before deciding to move to another bank. Lastly, only consider refinancing if it results in substantial long-term benefits.

The Benefits Of Using A Mortgage Broker

A professional mortgage broker works on behalf of the client to originate, negotiate and process both commercial and residential mortgages. Here are some of the benefits of hiring a mortgage broker.

The Benefits Of Using A Mortgage Broker
  1. Access To Many Loan Products

Mortgage brokers have relationships with many lenders. Therefore when you approach them looking to apply for a mortgage, you can get options from these lenders. A mortgage broker with a larger network can guarantee a good loan product with a favorable interest rate to suit your needs.

  1. Favorable Loan Product

Remember, a mortgage broker works for you and not the lending institution. His/her role would be that of a problem solver and knowledgeable consultant. Since they have access to numerous products, he/she can get you a loan offer that has a favorable interest rate, repayment terms and much more.

An expert mortgage broker should interview you to find out what you need both in the short and long term. There is much more to getting a loan product than simply getting a 30 year or 15 year option. An experienced mortgage broker offers innovative and sophisticated strategies to give you a good product.

  1. Expertise And Flexibility

A good mortgage broker can help you navigate any issue. He/she will handle the process and remove any bumps along the way. For instance, if you have credit issues, the mortgage broker should know the best lenders with favorable products to meet your needs. If you need a bigger loan than what your bank can approve, the broker should come in handy and provide sustainable financing from another lender.

  1. Time-Saving

When using a mortgage broker, you only need to make one application compared to doing so with every lender. The broker should give you a formal comparison of any recommended loans and provide you with the best information. You can gain access to the cost different of various loans, the rates, points and also the closing costs for each loan on offer.

  1. Cost Saving With No Hidden Fees

Lenders offer mortgage brokers loans on a wholesale platform. Therefore, you can get the best rates in the market and you can count on the most favorable rates. The best broker should reveal how much they initially paid for the loan and also the cost of their brokerage services. That way, you’re sure of how much you will be paying beforehand.

Take your time to find the best broker such as Mortgage Broker North Shore for your mortgage needs and enjoy these benefits.