Mortgage refinancing is a possibility that banks provide to people using a home loan. A loan secured by a mortgage is a long-term commitment. We usually take it for a few, and in most cases, even for several years. If after some time we consider that the mortgage terms are no longer favorable to us, we can transfer the loan to another bank.
What is a refinancing loan?
Of the many types of loans, a mortgage binds us to the bank for the longest period. This is not surprising – buying a house or apartment is a serious expense, and hardly anyone is able to buy real estate on the spot. Home and apartment loans allow you to live on your own, but they are also a heavy burden. Also psychic, because in many cases we have a huge debt to the bank even for the rest of our lives.
What if it turns out that the mortgage repayment terms are no longer favorable to us? Can I transfer my mortgage to another bank? Yes, refinancing loans allow for such maneuvers. It involves taking a new loan to pay back the previous one and changing the creditor, who we owe money to. Who can benefit from a refinancing loan? Everyone who pays off an uncomfortable mortgage, whose installments strongly harm the household budget. Check how to take a loan on better returns.
How to refinance a loan?
What do we have to do to transfer the mortgage to another bank? The procedure for obtaining a refinancing loan looks similar to the process of applying for a mortgage.
Step-by-step refinancing loan:
- Find an attractive refinancing loan offer. Ask for a monthly installment calculation and see if refinancing your mortgage will bring the expected benefits.
- Apply for a loan refinancing online, by phone or at a bank branch. Present the required documents about your current mortgage and other documentation necessary to assess your creditworthiness.
- Wait for the loan decision and release of the loan.
- Make any necessary changes to the land register. Cross out the previous bank and enter the banking institution that granted you the refinancing loan.
If we need additional funds, we can apply for a larger amount of refinancing loan and allocate the obtained money for any purpose. People who care about the lowest installment should decide on the longest loan period.
Refinancing loans also possible!
It is worth noting that non-bank institutions, whose flagship product is an online loan, also provide refinancing. In order to refinance a payday loan or installment loan, we take a loan from another company, and the funds we spend are used to pay back the current liability. Many loan companies complete all formalities themselves. We can only report that we are not able to deal with the existing installments and sign a new contract. It is worth doing to avoid the consequences of defaulting on the loan.
Refinancing – details. What to watch out for when refinancing your mortgage?
A decision to refinance a mortgage cannot be taken lightly. It should be considered as carefully as a mortgage contract. We must analyze the terms of the refinancing loan, paying particular attention to:
- the difference between the amount of current and future loan installments,
- interest rate on refinancing loan,
- commission for granting a refinancing loan,
- cost of refinancing loan insurance.
Remember that the loan interest rate consists of the margin and the WIBOR base rate. The bank sets the margin itself, but has no effect on the WIBOR rate, which can change every 3, 6 or 12 months. In addition, we should check the cost of early repayment of the current loan and fees related to changing the mortgage in the land and mortgage register. Only knowing the total cost of the loan allows you to make a wise decision and make sure that refinancing will be profitable for us. Credit transfer costs cannot be avoided, but they should be as low as possible.
It is worth remembering that the bank may propose additional products for the loan, e.g. a credit card, which will lower the margin on the one hand, but will be an additional obligation on the other.
Is it worth transferring the loan to another bank?
We already know that it is possible to transfer a loan to another bank, but does this make sense? Yes, especially when in this way we can reduce the total cost of the mortgage, and thus – pay lower installments. Another 20-30 years of arduous debt repayment awaits us – why not do it on better terms? Although at first it seemed to us that we chose the best and the cheapest mortgage, after a few years its offer may no longer be attractive to us.
Let’s see when it is still worth considering refinancing your mortgage?
A refinancing loan is a good opportunity to:
- changes in the loan terms (and the installments mentioned above),
- changes in loan repayment day,
- resignation from additional products for which we have signed a contract with a mortgage,
- changes in the installment payment system, i.e. changes from equal to decreasing installments or vice versa,
- shortening or extending the loan period,
- raising additional funds for other purposes.
Credit refinancing – pros and cons
The most important advantage of refinancing a loan is the ability to change repayment terms and reduce the monthly installment. We can save a lot, provided that you choose an attractive offer, and, as we have already mentioned, get extra cash to implement your plans.
Are there any disadvantages to the refinancing loan? Yes, first and foremost, refinancing your mortgage requires you to complete the formalities required by the bank. We need to spend a lot of time to choose the right offer, provide the necessary documents and sign the contract. An additional downside may be costs around credit. It happens that due to side fees the refinancing loan ceases to be profitable.
If we do not want to refinance the loan, we can negotiate with our bank by submitting an application to change the repayment terms. Banks do not always comply with customer requests, but nothing prevents you from trying to convince the lender to implement them. The bank may agree to our applications, provided that other banking products are used. Before making a decision, let’s check which of the solutions will be more profitable for us – renegotiating the contract or refinancing the loan.