Reinvest Your Home

Many people are unaware that they have the option of switching their loan to other investor; others are simply uninterested. They tend to be loyal with their very first lender but they don’t know that such loyalty will bring higher interest rates. Because of increasing number of housing loans and amortization period, the interest can range from thousands to hundreds of thousands of money. Below are some considerations when reinvesting your home.

Latest Interest Rate

When your current interest rate is higher than available housing loan packages on the market, it is time for you to consider reinvesting. Go back to your current bank or financial institution and ask them to reprice your loan package. Your lender might give you an offer. Make a comparison between this offer and with offers from other lenders to see whether you should switch or stay put.

Lock-in and Clawback Time Periods

When you get a housing loan, there may be a lock-in period wherein your mortgage lender will charge you a penalty fee, maybe a percentage of your outstanding loan amount, if you were to fully repay your loan. Most of housing loans have a clawback period wherein the lender will claim back “giveaways”, such as legal subsidies, that they “gave” you when you take up your housing loan. Lock-in period is different from clawback period. Thus, it is not advisable for you to reinvest due to these extra costs.

Loan Quantum

The higher the amount of your loan, the greater your savings for the same decrease in interest rates will be. Yet fixed cost to reinvesting does not vary much with quantum loan. The difference between your latest and reinvesting interest rates has to be larger for a relatively smaller loan as fixed cost consumes into a more considerable portion of your interest rate savings.

Distinguish Interest Rate Movements

Your analysis on how interest rates are moving can be a factor when considering whether you should reinvest. Try a floating rate package as an alternative to fixed rate package if the interest rates are decreasing. Conversely, if you are on floating rates and believe interest rates are increasing, switching to fixed rates may be a good choice.

Personal Financial Evaluation

Try to get a fixed rate package. Consider increasing your loan quantum. When your monthly income increased and you want to decrease interest payments, try to reduce your loan tenure.

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