Mortgage refinancing is a good step for getting better, more advantageous credit terms if you fail to agree on them with your existing bank before the mortgage fixation expires. For example, refinancing can give you a different repayment length, lower interest and monthly repayments, etc. As the market evolves over time and its status changes, the borrower is normally more likely to change the bank while repaying the mortgage than to stay with the original under the conditions that are already unfavorable after some time.
However, you can also use the refinancing if you are planning a change in the loan, such as an increase in the (non) purpose part, or the withdrawal of one of the debtors or the entry of a new debtor.
But calculate everything well, when choosing a new bank, compare APR and not just interest.
When to refinance a mortgage?
- Do you know when your mortgage fixation period ends? Being aware of this is important not only when considering refinancing.
- It is best to change the bank at the end of the fixation period, respectively. just before her end.
- Don’t leave refinancing at the last minute, it might not pay off. It is recommended to monitor the development of interest rates and APRs of other banks in the longer term, approximately half a year before the end of the fixation period.
- Your current bank will inform you about the new interest rate options for the next fixation period before the end of fixation, so be prepared in advance, calculate and compare the mortgage refinancing offers on the market, whether you are ready and avoiding time-consuming decision-making decisions.
- Then, one or two banks decide on a month or two before the end of fixation and start negotiating specific terms with them (try to push it a little bit; you may get even better conditions than are commonly stated on the bank’s website).
- It’s important to start early and keep track of what you have to offer, as banks typically inform the borrower about a change in interest rates for up to 2-3 weeks before the end of fixation, and it’s too late to start refinancing it was really beneficial.
- If you are not sure about refinancing, we recommend contacting a financial / mortgage advisor in advance to guide you in the right way.
How to refinance a mortgage?
- You do not always have to refinance your mortgage to get more favorable terms. Ask your existing bank for new terms well before the end of fixation, even before it is communicated to you (ideally a few months before the end of fixation).
- If he refuses to tell you before, start looking elsewhere. Search for offers from other banks and compare with each other, especially according to the APR, which not only expresses the percentage of how much you pay per year on interest, but also on other administrative fees. Also find out any penalties.
- When your bank tells you the new interest rate, compare the new APR with the APR of the other banks that you have been reporting to in the previous months and have already negotiated with the banks. Choose the most suitable one.
- If you decide to stay with your bank, notify the banks with which you negotiated the new terms (until the client has signed the contract, is not bound to the bank). Conversely, if you refinance, report this to your bank at least 14 days before the end of fixation.
- In the case of refinancing, the new bank will require you, for example (requirements vary from bank to bank): Identity documents. Mortgage contract from your previous bank, pledge contract. Acquisition title to property, extract from cadastre. Proof of income, confirmation of debt. Real estate photos, real estate estimate.
- Apply for a credit rating from an old bank for a new bank, see. below.
- A contract will be drawn up on the basis of fulfillment of all documents. Read it carefully, ask questions when you understand and agree, sign it.
- Within a few days of signing up, the money will be transferred between the banks and you will then start repaying the monthly installments on that date to your new bank account.
Can I refinance a mortgage outside the fixation?
Yes, it is possible, unless something else is agreed in the contract. But the problem when refinancing a mortgage outside the fixation is the cost of this step. In such a case, banks normally charge penalties to compensate for loss-making interest. Count on this and find out the amount of this fee. be interested in it already when discussing a mortgage loan.
What to watch out for when refinancing your mortgage?
- The condition for refinancing is to have a positive rating in bank and non-bank registers.
- Apply your bank in time for the Loan Quantification and your repayment agreement. Normally, you must request this document within 30 days of the fixation anniversary date.
- Also keep an eye on the date by which the old bank’s debt must be repaid. It is 2-3 days before the fixation anniversary.
- Ask all your important data carefully in your old bank in advance. Do not act in a time offset.
- When considering a new bank, consider possible expensive account maintenance, credit card, mandatory and expensive insurance cases, etc.
- Count on the fact that the change of the contract in the cadastre will cost you 1000, – CZK. The Bank may also charge hundreds to thousands for issuing the above-mentioned Loan Quantification and Repayment Document. It is also important to think of penalties for early repayment with an existing creditor. Think about whether the refinancing is worth it anyway.
- Don’t wait passively, you won’t get the benefits. Negotiate a new lower interest rate with your existing bank before it comes to the end of fixation. Show her a more advantageous refinancing offer with other banks: to make the bank as a client not to lose you, it will most likely improve your offer.
- Go ahead with your existing bank; if you agree with it, you will save a lot of additional administrative and financial burden associated with refinancing with another bank.