If you are wondering whether the installment you are currently paying on your mortgage can be lower, this is a good place for you. What is refinancing? It is the repayment of one loan with another, by design cheaper, to minimize the monthly cost of servicing it.
First of all, in an era of high interest rates and large increases in loan installments, we try to look for savings. It is worth looking at whether the loan you have has insurance that can be terminated without changing the price terms, or look for a cheaper one on the market as a substitute. In my opinion having life insurance for a loan is very important, so I don’t recommend saving money and terminating without replacing it with any other with a lower premium.
We never know what can happen, and with a standard i.e. 30-year loan term, there is too much time to predict what will happen to us.
Once we have found cheaper life insurance outside the bank, we can look at the remaining term of the loan and find out from the bank if there is a possibility for example of extending it. The possible difference in the monthly installment very much depends on how long we still have the loan to repay. Usually the maximum term is 30 years, so if we are only paying off the loan 2-3 years the difference, when extending the term, will not be significant enough to make it worth it. Another way to reduce the cost of the loan is to verify the margin you have, and realistically prevailing in the market for new loans. It is very likely that the value of the property you own has increased enough that another bank may
offer better terms.
Then it is worth contacting a credit expert to check possible differences in offers. The data you will need to recalculate the current loan terms are:
- the amount of borrowed debt
- the initial term of the loan
- the remaining term of the loan to be repaid
- the bank’s margin
- monthly current credit installment
- the projected current value of the property
It is also worth reading the contract to see if there is still a fee for early repayment of the loan. Current regulations impose on banks to waive the
aforementioned fees above 3 years, but up to 3 years of holding the loan such fee can happen. If the expert shows that he is able to get you lower loan terms it is worth refinancing the loan. The documentation necessary for this will be very similar to the one when applying for a loan. You will need to show income and confirm that the property can be collateral for the bank.
