The collateral that you have mortgaged becomes a very dimensional bank product as the value of your property appreciates over time even when your loan depreciates, the value of the asset can be used to generate cash flow by refinancing that mortgage. It can be done to obtain a lower interest rate, to shorten your loan tenure, to get the latest market value in order to finance a new purchase, for consolidating debt, for a conversion to a different mortgage plan.
Just like any other process applying for a new mortgage is quite simple, the steps involved are
1.An assessment of your present mortgage.
2.Contacting the banks to get adequate information about the different types of offers keeping in mind the ELR, the moving cost whether it is partial or full and to check if there is a lock-in period. Evaluating all these and integrating it with your objective set earlier.
3.Negotiate for a convenient ELR succeeded by comparing all the offers by different banks.
The debt service ratio of your newly refinanced loan application will be based on a 10-year tenure whereas the portion used to repay your existing mortgage will be based on your normal mortgage tenure that will 35 years.
The interest on mortgage will be 4.4%
The cost involved will be:
The amount that you will have to spend on in taking up a new loan. Valuation fees, legal fees, disbursement, and stamp duty fees.
Mortgage lock-in period
When you are paying off your existing loan against property, check whether you are still bound by your lock in period. Banks normally charge interest of 2-5% for an early settlement that is of you are paying off within the first 2 years.
The top up loan will always be an alternative, it is an additional loan on top of the existing mortgage. Some banks may start a simultaneous account or just top it on the existing account, top up loan can only be done with the existing bank, the bank will have the same conditions and terms as followed on the existing loan.