Reassessing Your Home Loan: A Smart Way to Save on Bank Interest with Home Refinancing
In this piece, we’ll provide some tips on how to cut down on bank interest rates. One effective way to achieve this is through home refinancing.
In this era of economic uncertainty, many individuals opt for home refinancing to maintain their financial well-being.
So, the golden question is, how can this be done efficiently?
This article will explain how to reassess and evaluate your home loan and how refinancing can help you reduce your financial burdens.
Reassess And Evaluate Your Home Loan
As we usher in the month of July, another important event is also on the horizon: the arrival of your home loan statement from your banking institution.
This document, usually dispatched biannually, carries a wealth of insights and data, and it should never be hastily discarded or overlooked.
Many individuals tend to underestimate the significance of this document.
Yet, in truth, it is a pivotal tool for you to take stock of your financial standing.
Your home loan statement offers an in-depth snapshot of your current loan status, enabling you to effectively reassess your home loan situation.
Each statement comes packed with valuable information that, when correctly interpreted, can provide guidance on your financial trajectory.
As such, I’ve made it a consistent habit to allocate dedicated time every six months to meticulously analyze every figure presented in my loan statement.
By doing so, I ensure that I fully understand my financial obligations and am able to make informed decisions moving forward.
I am quite cautious when it comes to managing my finances.
One of the ways I ensure that I am making informed decisions is by carefully scrutinizing my loan statement.
This allows me to identify any discrepancies or areas where I could be more financially savvy.
Why is it Important to Analyze Your Home Loan?
This approach allows you to make the most sound decisions when it comes to managing your money and staying on top of your loan payments.
It’s always better to stay ahead of the game and take control of your finances rather than falling behind and struggling to catch up later on.
The home loan statement contains significant figures like the outstanding loan balance, total installment amount, interest paid, and deducted principal.
Outstanding Loan Balance
Outstanding loan balance will indicate how much the principal has deducted month by month.
You can look closely at the loan balance from the first month(January) and last month (June).
You have to make sure the loan balance in the last month (June) is lower than in the first month (January).
If it is higher, you need to investigate further. The culprit could be your late interest, increases of interest rates, etc.
Total Installment Amount
Total installment amount paid, basically is the amount you pay for six months.
For example, If the installment is RM2300 a month, therefore for 6 months, the total is RM13,800.
Total Interest Paid
Total interest paid is the amount of interest a bank has charged over six months.
Typically, the loan statement state “total interest charged.”
For example, if total interest paid over six months is RM8400
If you want to know the average interest charged per month, basically you divide RM8400 for 6 months and you get RM1400.
Typically at beginning of a home loan, the interest is usually higher than the principal.
For example, if you pay RM2300 every month, RM1400 will be used to pay the interest, and only RM900 will be used to deduct the principal.
Seems a lot?
Paying more interest to the bank is often an indication that you may need to reassess your financial strategies and consider options such as loan refinancing or additional payments to help reduce the overall cost of your debt.
While it may seem unjust to pay a substantial amount of interest to the bank, there are indeed numerous strategies you can adopt to lessen the interest payment burden.
Strategies to Decrease the Amount of Interest
1. Paying the Loan On Time
Ensuring timely payments on your home loan is a straightforward strategy to cut down your interest. Despite its simplicity, it’s surprising how many individuals struggle with punctuality in their repayments.
Bear in mind that any delay in your home loan payments could result in a penalty from the bank.
Moreover, failing to make payments for two consecutive months may prompt the bank to increase the interest rate. This rate hike continues until you manage to regularize your payments over the following months, which unfortunately, further exacerbates your financial situation.
2. Requesting a Reduction in Interest Rate
Consider penning a letter to your bank to request a reduction in the interest rate.
The possibility of a rejection exists, but the attempt itself is cost-free and could potentially decrease your payments to the bank.
Ensure to clearly articulate your reasons for seeking this reduction.
You’d be surprised to learn how many people have successfully managed to secure a lower interest rate with this strategy.
3. Making Additional Payments Beyond the Installment Amount
Consider supplementing your regular payments with extra amounts towards your home loan each month.
Before proceeding, however, do ensure that your loan agreement permits such additional payments.
Typically, those with semi-flexi and full-flexi loan accounts have the privilege to make these supplementary payments.
Implementing this strategy can significantly reduce the total interest you pay over the course of your loan term.
Refinancing Can Help You Reduce Your Financial Burdens
4.Contemplating Home Refinancing
Refinancing your home loan presents another effective avenue to decrease your interest payments.
This process entails transferring your existing home loan to a different bank that provides a lower interest rate.
While the procedure does come with associated costs, there’s an option for a zero entry cost, in which the bank absorbs the legal and appraisal expenses.
Additionally, if you currently don’t have a semi-flexi or full-flexi account, refinancing gives you an opportunity to opt for one.
Both these types of accounts can significantly contribute to your overall home loan savings.
Intrigued by the Idea of Home Refinancing?
Armed with these strategies, you’re now better equipped to minimize the interest on your home loan.
If you’re considering home refinancing and have any queries, we’re here to assist. Please don’t hesitate to contact us.
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