Mortgage refinancing – what is it and what is it for?

Purchasing your own apartment often involves taking out a mortgage loan. This allows you to fulfill the dream of owning your own place and achieving life stability. On the other hand, it is a significant commitment that can last up to several decades. As we know, during this period, the loan conditions, just like your financial situation, can change. In this situation, mortgage refinancing can be a good solution. But how does this process work in practice?

What is Mortgage Refinancing?

Simply put, mortgage refinancing is transferring your loan to another bank in order to obtain more favorable financing conditions. Naturally, the bank to which you transfer the loan pays off the existing debt. The debt itself still exists, but to a different entity. The essence is therefore a change of the creditor and the terms of the agreement, while keeping the same property as security for the mortgage loan.

Why is it Worth Refinancing a Mortgage?

A new loan offer should be more favorable than the existing one, for example, by having a lower interest rate, which will allow you to save money. Refinancing offers a chance to lower your monthly installment, shorten the loan term, or achieve a lower total amount to be repaid. This solution is especially recommended for people who have a long-term commitment entered into under unfavorable lending conditions (e.g., with a high margin from years ago), or whose creditworthiness has increased, allowing them to negotiate a better offer with a different bank.

What Conditions Must Be Met to Refinance a Mortgage?

Mortgage refinancing is possible at any time, provided you can find a more beneficial offer in another bank. This should be an offer with a lower Annual Percentage Rate (APR). However, it is worth checking whether the original agreement does not provide for a penalty for early repayment of the debt in the first years.

Remember that when refinancing loans, you do not have to provide a down payment again, as this condition was met when concluding the first loan agreement. However, you must be prepared to cover additional costs, such as the commission for granting the new loan or the fee for the property appraisal.

The entire process can be significantly simplified and expedited by using the assistance of a credit expert, who is fully familiar with the current loan conditions across all banks and can find the most favorable solution for you.

Costs of Mortgage Refinancing

Despite the potential benefits, refinancing always involves additional fees that must be accurately calculated. The most important costs include:

• Commission for granting the new loan in the new bank.
• Fee for property valuation (appraisal report).
• Court fees for entering the mortgage in favor of the new bank into the land and mortgage register.
• Civil Law Transactions Tax (PCC) for the establishment of the mortgage up to a specified amount (if required).
• You should also check the original agreement to see if the current bank will charge a fee for the early repayment of the debt.

What Documents Will Be Needed for Mortgage Refinancing?

To complete the refinancing process, several important documents are necessary. Above all, it is worth checking the offers of competing banks, as they may differ. The signed original loan agreement, a certificate of the outstanding debt, information about the interested party’s financial situation, as well as a property appraisal and an extract from the land and mortgage register will be essential. In some cases, the bank may also ask for a certificate confirming no arrears in the repayment of the existing loan. After gathering the documents and reviewing the bank offers, you must submit an application, which will be analyzed by specialists. If you receive a positive response, you sign the agreement with the new bank.

In summary, mortgage refinancing, despite additional costs and formalities, can prove to be a useful solution that will ultimately be beneficial for you and help save a substantial sum of money. The key is to precisely calculate the gains from a lower installment against the costs of the entire refinancing process.

Don’t have time to compare bank offers? Use the help of a credit expert – it’s the fastest path to savings! Remember that the assistance of a credit expert, who will professionally guide you through the entire process and help with negotiations, is completely free of charge to you.