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04 May 2011

Refinancing and Second Home Loans

This option allows the borrower to increase the loan amount after repaying for certain tenure. What does refinancing mean and how does this relate to home loans?
The term refinancing means that some property or asset which has been used as a security by the borrower can again be mortgaged to collect another loan. As property prices are on a rise the value of your home also increases than the amount you had paid for to purchase it.  One can increase their loan amount after some years when the total value of the property increases. As suggested in my earlier posts the bank or financial loan lending institution offer loan against any ownership flat or property according to its market value. The borrower can avail a loan of maximum 60% of the total value for residential property and 50% loan on commercial property. Since loans against property are taken for expanding business or other property purchases the borrower can after some years apply for the refinancing option and get another loan on the same property. This proves to be a boon for many as they can benefit from the same asset twice.
When taking home loans the borrower who has taken a mortgage loan or loan against property and is repaying the same needs some more financial assistance he can go in for this option. By refinancing he can get some more amounts depending upon the increase in value of the mortgaged property or house. This means that the borrower can use the same asset twice to avail an increase in the borrowed loan amount.  Since property rates are increasing refinancing has also become easy and lenders are open to this type of loan options.
Even when you are paying off a home loan you can purchase another second home by mortgaging the same property to avail loan. If the total market value of your property is higher than the estimated cost of the two houses any loan lending company will be happy to offer you loan. Since they have very little risk involved by offering a new loan on the same property. Your previous track record and payments schedule along with the monthly EMIs the new lender will allow a fresh loan keeping in consideration the total value of your property. In case of default by the borrower they can always sell this property to recover the dues.
Hence it is the right time to invest in second homes as houses are becoming precious and dear in terms of cost and space. And that too by refinancing option of getting loan on the same property and availing a new loan for another home.

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