In the aftermath of the Bangkok floods in 2011, the Bank of Thailand sponsored low interest rate loans to victims of the catastrophe. However, those interest rates are set to increase in the coming months with banks urging those taking advantage of the programme to start looking at refinance their housing loans, reports local media.
The loans allowed borrowers to enjoy an interest rate of 3 per cent for 5 years. That period is soon coming to an end and many who financed a purchased via the scheme will need to refinance in order to avoid a substantial increase in interest costs. Failing to do this will mean it takes longer to payoff loans since less will go towards the principle.
There are a few options open to borrowers. They can choose to remortgage, switching their housing loan to another lender. They also have the ability to select a different interest rate package with their existing lender, but doing this usually results in higher interest costs when compared to switching to another lender.
There is a benefit to doing this, as borrowers will not need to pay mortgage transfer or appraisal fees. The extra fees when choosing a new lender cost more than the slightly higher interested rate charged by the current lender in many instances. Regardless of what option the home buyer selects, they will need to keep their financial discipline in order to be eligible for a remortgage.
“A borrower’s good debt repayment history will provide greater access to new loans with the best rates. Taking care of your monthly debt instalments and repaying on time is good practice. If you skip even a few payments, you will be classified as a bad borrower and this will affect new loan and refinancing applications,” says CIMB Thai Executive Vice President Onanong Udomkantong to the Bangkok Post.
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