A Step-by-Step Guide To Refinancing Housing Loan

Post : May 26, 2023

A housing loan is a type of loan that is specifically designed to help individuals or families purchase a home. The loan is typically secured by the property being purchased, and the borrower makes regular payments over a period of time to repay the loan. Housing loans may have different repayment terms and fees depending on the lender and the borrower's financial situation.

What you need to know about Refinancing Housing Loans

Purpose: Refinancing a housing loan involves replacing an existing loan with a new one, typically with better terms. The primary purpose of refinancing is to save money on monthly payments.

Eligibility: To be eligible for refinancing, borrowers must have a good credit score, steady income, and equity in their home. Lenders will also consider the borrower's debt-to-income ratio and employment history.

Costs: Refinancing a housing loan may involve closing costs, which can include appraisal fees, title search fees, and loan origination fees. Borrowers should factor these costs into their decision to refinance and ensure that the savings from the new loan outweigh the costs.

Process: The process of refinancing a housing loan is similar to applying for a new loan. Borrowers will need to provide documentation such as income statements, credit reports, and property appraisals. The lender will then evaluate the borrower's application and determine if they are eligible for the new loan.

Risks: Refinancing a housing loan may come with risks, such as extending the repayment period or increasing the overall cost of the loan. Borrowers should carefully consider the terms of the new loan and ensure that it aligns with their financial goals before deciding to refinance.

What is the procedure for refinancing? 

If you are considering refinancing your housing loan, here is a step-by-step guide to help you through the process:

1. Evaluate your current loan

Take a close look at your current housing loan and assess whether it is meeting your financial needs and goals. Consider factors such as repayment loan terms, monthly payments and any other fees or charges associated with the loan.

2. Research lenders and refinancing options

Look for refinancing options from Islamic financial institutions that offer competitive rates and flexible terms. You can use online resources to find a list of institutions that offer Islamic home loan refinancing.

Look for lenders who offer housing loans with better rates and terms than your current loan.

3. Compare loan offers, rates and terms

Compare the rates and terms offered by different Islamic finance institutions. Look for institutions that offer better rates. Once you have identified potential lenders, compare their loan offers to find the best one for you. Look at the repayment terms, fees and charges.

4. Apply for loan refinancing

Once you have selected a lender, or a loan offer and found a refinancing product that meets your needs, submit an application for the loan. 

To apply for refinancing you will need to provide financial information and the necessary documents required by the Islamic finance institution such as income and expenses.

5. Provide documentation

The lender will require documentation such as proof of income, bank statements, and property valuation reports. Make sure you provide all the necessary documentation promptly.

6. Wait for approval

The lender will review your application and documentation before approving or rejecting your loan. This can take several days to weeks.

7. Accept the loan offer

If your loan is approved, carefully review the loan offer before accepting it. Make sure you understand all the terms and conditions of the loan.

8. Close your current loan

Once you have accepted the loan offer and your refinancing application is approved, the lender will arrange for the settlement of the loan.

Close your current loan by paying off the remaining balance. This involves transferring the funds to your existing lender to pay off your current loan.

Make sure to follow all the necessary procedures to ensure a smooth transition to your new loan.

9. Start making repayments

Once the loan is settled, you will start making repayments on your new housing loan according to the agreed-upon terms and conditions.

10. Check for Shariah compliance

Ensure that the refinancing product is Shariah-compliant. Shariah compliance means that the financing products follow Islamic principles and values.

Consult with a qualified Shariah advisor to ensure that the refinancing product you are considering is Shariah compliant.

11. Review the terms and conditions

Carefully review the terms and conditions of any refinancing product before signing any contracts or agreements. Make sure that you understand all the terms and conditions, including the fees and charges associated with the loan.

12. Enjoy the benefits of refinancing

Once you have successfully refinanced your housing loan, enjoy the benefits of lower monthly payments and better loan terms.

Benefits of housing loan


The primary benefit of a housing loan is that it enables individuals or families to purchase a home, which can provide long-term stability and financial security.

Flexible Repayment Terms

Housing loans may offer flexible repayment terms, such as longer repayment periods or the ability to make additional payments without penalty. This can help borrowers customize their loans to fit their financial situation and goals.

Home Improvement

In addition to purchasing a home, housing loans can also be used for home improvements or renovations. This can help increase the value of the property and improve the quality of life for the borrower and their family.

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