Is mortgage refinancing profitable? Pros and cons, bank reviews

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Decrease in mortgage rates has led to the fact that the Russians began to apply for refinancing loans more often. Banks do not satisfy these requests. In July 2017, the average loan rate was 11%. This is a new record in the history of the Central Bank. Two years ago, mortgages were issued at 15%. How do citizens achieve favorable credit conditions?

Essence

Refinancing is a program with which you can pay off your old loan by applying for a new loan. The service is divided into two types:

1. Internal re-issuance of a loan on new terms by drawing up an additional agreement.
2. External re-registration is getting a loan from another bank. In this case, the client will have to go through the procedure of registration of the contract again. The process involves the issuance of a new loan account and its security in the presence of documents confirming ownership.

Is it profitablemortgage refinancing?

It makes sense to re-register the contract if the size of the regular payment is reduced or the rate is reduced. For example, a client has received a mortgage in the amount of $200,000, which he must repay in 30 years. The contract is serviced at 12% per annum. The monthly payment will be $2,057. Is it profitable to refinance a mortgage if the loan rate drops to 9%? Yes, this will save the borrower $488 monthly. Over thirty years, the savings will be $16,000.

Experts advise refinancing mortgages if the interest rate drops by at least 2 percentage points. The average market rate on the market today is 10%. Accordingly, it is more profitable to deal with the issue of refinancing for customers who took out a mortgage in 2015. Then the average market rate was 12%. Those who bought a home just a year ago should wait for the rate cut to 9%.

Is it profitable to refinance a mortgage if the contract provided for annuity payments? No, according to this settlement scheme, the first payments will be used to pay off interest. If more than half of the term has passed since the execution of the contract, then refinancing will only bring losses.

Check whether it is profitable to arrange mortgage refinancing at VTB Bank as follows:

1. It is necessary to take the current payment schedule and add up all the remaining payments under the contract.
2. Next, enter the initial conditions into the loan calculator on the bank's website: the period remaining under the current contract, the calculated balancedebt.
3. The calculator will calculate your monthly payment.
4. This amount should be multiplied by the number of months corresponding to the term of the new loan.
5. Need to compare the results. If the difference is significant, then refinancing will be profitable.

Benefits

As a result of on-lending, the interest rate will decrease, but the term of the contract will be extended. Is it profitable to refinance a mortgage? Customer feedback confirms that borrowers with a stable high income can save money significantly. If it is not possible to renew the agreement at the bank that issued the loan, you can always contact another financial institution.

There are some positives in lowering rates. According to the Central Bank, as of August 1, 2017, mortgage loans were provided by 20% more than in the same period last year. The total volume of lending increased by 4.7 trillion. rubles.

Preparation

To answer the question "Is it profitable to refinance a mortgage at Sberbank?" in a particular case, the cost should be calculated.

• first of all, you need to study the contract, pay special attention to the clause regarding interest-free early repayment of the debt;
• next you need to calculate the size of the commission and adequately assess your capabilities;
• if it is decided to re-register the contract, then you should contact the creditor;
• to responsible customers, banks go to a meeting and draw updebt restructuring, it does not always provide for on-lending;
• if you failed to achieve a result in one bank, you should contact another credit institution.

Documents

To arrange mortgage refinancing at Tinkoff Bank, a number of documents should be prepared:

• copy of passport;
• certified copy of the employment record (agreement, contract);
• certificate of income (2-personal income tax) from the place of work;
• borrower's life insurance contract;
• initial agreement and bank statements with debt repayment schedule.

After filling out the questionnaire, the bank begins to assess the solvency of the borrower based on his data and the loan agreement. If the application is approved, the borrower should provide documents for the property, certificates with the balance of the debt and the absence of restructuring, a letter with the details of the account from which the repayment is made.

Preparing an application

As soon as the client receives the bank's consent to re-execute the contract, the process itself begins. The borrower will receive funds to repay the previous loan. The property will be transferred as security to a new banking institution.

Customer should immediately prepare for additional costs. If the insurance company is not an accredited partner of the bank, then it will have to be replaced. Otherwise, the lending rate will increase. At Sberbank, the refusal to lend to life will be offset by a 1 p.p.“Absolut Bank” and even more - 4 p.p.

If the insurance was issued at the conclusion of an agreement with the first bank, then the document will simply need to change the beneficiary. Also, during the period of registration of a new contract (until the old one is paid off), an inflated rate (1–2 p.p.) is charged for life insurance. It lasts no more than a month.

What's going on in the market?

Sberbank lowered the mortgage refinancing rate to historical levels in two hundred residential complexes. You can buy housing in a new building at 7.4-10% per annum, in the secondary market - at 9-10%. The VTB Bank Group issues mortgages at 9.9-10%, and issues funds for the purchase of new housing at 9.6-10%.

On the same terms as in Sberbank, you can arrange mortgage refinancing at Otkritie Bank - at 10.2%. Absolut Bank and Uralsib also cut rates to 6.5% for a limited number of new apartments.

Refinancing rates of Russian banks are presented in the table below.

Bank	Rate, %
Sberbank	10, 9
VTB	9, 7
Gazprombank	10, 2
Deltacredit	9, 5
Raiffeisenbank	10, 5
Uralsib	9, 9
"Opening"	10, 25
"Absolute"	10
St. Petersburg	10, 9
Zapsibkombank	10

One of the important conditions for on-lending is the absence of delays, pen alties and fines. If there are any, then you must first pay off the debt, and then apply.

Problem

Is mortgage refinancing profitable for credit institutions? In most cases, no. As market rates decline, banks are trying to maintain interest income, which is of great importance in an unstable system. Therefore, they refuse to change the terms of credit. Clients are not even given formal reasons for rejection.

According to the law, the borrower has the right to refinance the loan, if the contract does not contain a direct prohibition on this operation. However, today banks are increasingly including this clause in the contract. This has already attracted the attention of the regulator.

Clients have only one chance to change the bank's decision. It is necessary to provide a letter of guarantee or a preliminary agreement from another credit institution, under the terms of which the bank undertakes to close the loan ahead of schedule and issue a new mortgage to the borrower on the same terms, but at a reduced interest rate. In this case, the lender will meet the client halfway, since early repayment of the contract will greatly reduce his interest income. The deal will become unprofitable.

Is refinancing profitablemortgages: cons

It is almost impossible to achieve a revision of the terms of the contract if part of the debt was paid by maternity capital, the property is registered in the shared ownership of parents and minors. Implementing such an object is very difficult.

Revision of the terms of the contract may affect the requirements of the Bank of Russia. According to the regulations of the regulator, a financial institution must form a reserve for each issued loan. This will result in a freeze on funds and may impact compliance.

Is it profitable to refinance a mortgage? Not always, because you will have to pay money for the procedure for reissuing documents. The first payments on the new loan will be used to pay off the reduced interest. And finally, the most important drawback is that the borrower will lose tax benefits. In the case of refinancing, it is no longer a mortgage, but a loan agreement secured by real estate. Therefore, borrowers are deprived of tax deductions.

When is it profitable to refinance a mortgage? Such an operation is economically justified only in one case: if the new creditor's rate is at least 2 percentage points lower than that of the previous one. Therefore, there are so many who want to get refinancing.

Reviews

The price of the issue of refinancing is of great importance. Is mortgage refinancing profitable? Customer reviews confirm that no commission is charged for reissuing. However, the original bank may charge money for issuing each of the certificates. The average cost of such documentsis 1 thousand rubles.

The borrower will have to pay for the notary registration of the transaction and the services of the appraisal company on their own. The cost of processing the first document is 1.5-2 thousand rubles, and the second - 4 thousand rubles. Only after the execution of all documents is the encumbrance removed from the mortgage and it is registered under a new agreement in the Regpalat.

Other types of on-lending

Refinancing is provided not only for mortgages, but also for a credit card, cash loan or car loan. Consumer loans are most quickly reissued, and mortgages are the longest. Mortgage property needs to be re-registered and sorted out with insurance. In general, the advantage of the service is that a new loan is issued on more favorable terms, and the monthly payment is reduced. The borrower can even change the currency.

The service mechanism is very simple. The bank transfers funds to the account from which the debt was written off. The borrower needs to apply for early repayment at the first bank and this should be done before the due date for making a new payment.

Usually the first two months the rate on a loan in a new bank increases. However, another scheme may also apply. 40-50 days are allocated for the period of repayment of old loans. After this period, the rate increases. So, for example, they do it at Alfa-Bank. When refinancing a loan, the owner of a salary card is served at a preferential rate of 11.99%. He can draw up a new contract for 7 years and refinance the debt within 3mln rub. For non-salary clients, the limit is reduced to 2 million rubles.

Market situation

Refinancing is one of the bank's key services. Therefore, there is serious competition in the market. Some financial institutions provide the service online. Alfa-Bank customers just need to fill out a questionnaire via the Internet bank and get answers to all questions in the chat.

For preliminary calculations, online calculators are placed on the sites. When re-issuing a loan, you can increase the loan amount and get the balance in cash. Customers can repay their debts through Internet banking.

Permission from a financial institution is not required to conduct a transaction. Banks are reluctant to accept the decision of customers to be served in other credit institutions. No one wants to lose profitable customers.

Banks themselves offer this service primarily to legal entities in order to get a client for comprehensive services and not only under a credit program. Individuals are more often credited on consumer loans. Rescheduling secured loans is extremely rare.