Refinancing a loan is nothing more than transferring it to another bank under new conditions. If you have had a mortgage for at least several years, you may want to consider refinancing it, because it can bring financial benefits. Much depends on the terms of your loan agreement.
When is the loan refinancing profitable?
There are three most common reasons for deciding to transfer a loan to a new bank. They can occur together or separately.
Unfavorable offer at the current bank
It is primarily about a high loan margin, which has a large impact on the amount of monthly installments. For example, banks set high margins when the economy is growing fast and interest rates are low. Therefore, if interest rate is currently higher than when you took out the loan, it is worth considering refinancing the loan.
Taking out a loan a few years ago, your earnings probably were lower than they are now. In addition, you have repaid part of the loan over the past few years. These two factors: higher earnings and a smaller loan amount should improve your credit standing and lower the loan interest rate.
You need extra money
If you repay the loan for at least a few years, then you probably have already repaid tens of thousands of zlotys. If your apartment has gained in value, then during refinancing your mortgage you have a good chance of receiving additional money, e.g. for renovation or retrofitting.
See all the costs of refinancing a loan
If it turns out that your loan margin is higher than other banks offer, it means that by refinancing your loan you can save a lot on monthly installments. But installments are not all the costs you will incur.
Costs for early repayment of the mortgage
By refinancing your mortgage, you repay the old one with the money from the new loan. In the event of early repayment, the bank may charge fees that are stipulated in the loan agreement. The fee for early repayment of the loan is up to several percent of the loan amount and is usually in force in the first years after the loan is disbursed. If you repay a loan over 5 years, then you probably have nothing to fear.
The cost of taking a new loan
Such costs will definitely appear. You should not be afraid of them, but it is worth calculating exactly how much they amount to be sure that refinancing will pay off. The costs in this case may be: a commission for granting a mortgage, a change in the terms of property insurance, notary and court fees (changes in the land and mortgage register).
Is it worth refinancing your mortgage?
If you plan to pay off your mortgage for at least the next few years, the savings you will achieve thanks to refinancing can reach several or several thousand zlotys. Even with refinancing costs, your home budget can benefit. It is not worth hurrying with such a decision. It is definitely more profitable to spend time accurately counting all costs and finding the best loan offer.