A Refinancing Loan, Or How To Convert Your Mortgage Into a More Advantageous Offer?
This is a solution dedicated to clients with a mortgage. A refinancing loan is still a relatively unpopular solution among clients of banks. It is often confused with other types of loans, such as a consolidation loan. However, this is an offer of a completely different nature. In the case of consolidation we are dealing in a combination of several different financial obligations. On the other hand, the refinancing loan enables us to transfer a large financial liability, which is a housing loan, from one bank to another, in which the offer appeared on better terms.
Refinancing is an interesting proposition
Therefore, clients who currently pay off mortgage loans and who are not satisfied with its conditions or their life and financial situation have changed over the years, can not apply for such a loan, they simply are not able to pay back their liabilities in their current form. In the latter case, refinancing is intended to enable us to extend the loan repayment period, and thus reduce the monthly installment. Of course, you should be aware that the longer the loan period, the less this solution is beneficial for the client. However, if we have no other choice, it is definitely better to opt for such an option than to lead to a situation in which we will start to default on repayment of installments.
Refinancing is also an interesting proposition for people whose financial situation has improved significantly over the years, and therefore plan to repay the mortgage more quickly or to consider the next commitment.
When refinancing the loan is profitable?
Taking out a refinancing loan is profitable when there are offers on the market whose overall costs are lower than those which we incur due to our current liability. They can be, for example:
– lower bank margin,
– better interest rate,
– lower commission,
– lower fees related to loan security,
– better terms, including all other additional costs associated with the long-term loan service.
If you are thinking about refinancing, it is worth going to a good financial advisor who will analyze your situation and help you choose the right solution. Remember, however, that obtaining the bank’s consent to refinance the loan may be even more difficult than obtaining a mortgage. Of course, if you repay a housing loan at very unfavorable conditions compared to current conditions or your financial situation is significantly different from the one at the time of taking the previous loan, it is always worth trying to refinance. Do not be discouraged, even if one bank refuses you, try it in another. Sometimes, it is also worth to wait a few months, a year or two, improve some of your financial situation and creditworthiness and apply again.
Remember to always read the offer of a new loan carefully, and if you do not understand any provisions in the contract, use the advice of financial experts. It may happen that a refinancing loan will involve additional fees for an annex to the contract or a re-valuation of the property you purchased for the previous mortgage.