The decrease in mortgage rates led to the fact that Russians began to apply more often for refinancing loans. 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?
Refinancing is a program with which you can pay off an old loan by issuing a new loan. The service is divided into two types:
- Internal re-issuance of a loan under new conditions by drawing up an additional agreement.
- External reissuance - is obtaining a loan at another bank. In this case, the client will have to go through the process of completing the contract again. The process involves the issuance of a new loan account and its provision in the presence of documents confirming ownership.
Is mortgage refinancing profitable?
It makes sense to deal with the renewal of the contract if the regular payment is reduced or the rate is reduced. For example, a client received a mortgage in the amount of 200 thousand dollars, which he must repay in 30 years. The contract is serviced at 12% per annum. The monthly payment will be $ 2,057. Is mortgage refinancing profitable if the loan rate drops to 9%? Yes, this will allow the borrower to save $ 488 per month. Over thirty years, savings will amount to 16 thousand dollars.
Experts advise refinancing a mortgage if the interest rate drops by at least 2 pp. The average market rate on the market today is 10%. Accordingly, it is more profitable to deal with the issue of refinancing to customers who issued a mortgage in 2015. Then the average market rate was 12%. Those who purchased housing just a year ago need to wait until rates are reduced to 9%.
Is mortgage refinancing profitable if the agreement provided for annuity payments? No, according to this settlement scheme, the first payments will be sent to pay off interest. If more than half of the period has elapsed since the conclusion of the contract, then re-credited only will bring losses.
You can check whether it is profitable to arrange mortgage refinancing at VTB Bank as follows:
- You need to take the current payment repayment schedule and add up all the remaining payments under the contract.
- Next, you should enter the initial conditions in the loan calculator on the bank’s website: the period remaining under the current agreement, the calculated balance of the debt.
- The calculator will calculate the monthly payment amount.
- This amount should be multiplied by the number of months corresponding to the validity period of the new loan.
- It is necessary to compare the results. If the difference is significant, then refinancing will be profitable.
As a result of the refinancing, the interest rate will decrease, but the contract will be extended. Is it beneficial to do mortgage refinancing? Customer reviews confirm that borrowers with a stable high income can save a lot of money. If you fail to reissue the contract with the bank that issued the loan, you can always contact another financial institution.
There are positive aspects to lowering rates. According to the Central Bank, on 01.08.2017 mortgage loans were provided 20% more than for the same period last year. Total lending increased by 4.7 trillion. rubles.
To answer the question “Is refinancing of a mortgage in Sberbank profitable?” in a particular case, a cost calculation should be made.
- the first thing you need to study the contract, pay special attention to the item that relates to interest-free early repayment of debt;
- Next, you need to calculate the size of the commission and adequately assess your capabilities;
- if a decision has been made to engage in renewal of the contract, then you should contact the creditor;
- banks are meeting with responsible customers and filling out debt restructuring; it does not always provide for re-lending;
- if it was not possible to achieve a result in one bank, you should contact another credit institution.
In order to obtain mortgage refinancing at Tinkoff Bank, a number of documents should be prepared:
- copy of passport;
- a certified copy of the work book (contract, contract);
- certificate of income (2-personal income tax) from the place of work;
- borrower life insurance contract;
- initial agreement and bank statement with a debt repayment schedule.
After filling out the questionnaire, the bank begins assessing the solvency of the borrower based on its data and the loan agreement. If the application is approved, the borrower should be provided with 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.
As soon as the client receives the consent of the bank to renew the contract, the process begins. The borrower will receive funds to repay the previous loan. The property will be transferred as collateral to a new banking institution.
The client should immediately prepare for the 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, a refusal to provide life crediting will be offset by an increase in the rate by 1 pp, at Absolut Bank and even more - 4 pp
If insurance was issued at the conclusion of the contract with the first bank, then in the document you just need to change the beneficiary. Also, during the period of execution of a new contract (until the old one is paid off), an overstated rate (1-2 pp) on life insurance is charged. It lasts no more than a month.
What is going on in the market?
Sberbank lowered the mortgage refinancing rate to a historical level in two hundred residential complexes. Housing in a new building can be purchased at 7.4-10% per annum, in the secondary market - at 9-10%. VTB Bank Group draws up mortgages at 9.9-10%, and disburses funds for the purchase of new housing at 9.6-10%.
Under the same conditions as in Sberbank, it is possible to arrange mortgage refinancing at Otkritie Bank at 10.2%. Absolut Bank and Uralsib also reduced rates to 6.5% on a limited number of new apartments.
Refinancing rates for Russian banks are presented in the table below.
One of the important conditions for re-lending is the absence of arrears, penalties and fines. If any, then you first need to pay off the debt, and then apply.
Is mortgage refinancing profitable for credit institutions? In most cases, no. Amid falling market rates, banks seek to maintain interest income, which is of great importance in an unstable system. Therefore, they refuse to change lending conditions. Clients are not even given formal reasons for rejection.
By law, the borrower has the right to refinance the loan, if the contract does not contain a direct ban on this transaction. However, today banks are increasingly including this item in the contract. This has already attracted the attention of the regulator.
Customers have the only chance to change the decision of the bank. It is necessary to provide a letter of guarantee or a preliminary contract from another credit institution, under the terms of which the bank is obligated to prematurely close the loan and issue a new mortgage to the borrower under the same conditions, but at a reduced interest rate. In this case, the lender will meet the client, because early repayment of the contract will greatly reduce its interest income. The transaction will become unprofitable.
Is mortgage refinancing profitable: 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 made into shared ownership of parents and minors. To realize such an object is very difficult.
The revision of the terms of the contract may affect the requirements of the Bank of Russia. According to the regulatory standards, a financial institution must form a reserve for each loan issued. This entails a freeze of funds and may affect compliance.
Is it beneficial to do mortgage refinancing? Not always, because you will have to pay money for the procedure for re-issuing documents. The first payments on the new loan will be used to repay reduced interest. And finally, the main drawback is that the borrower will lose tax benefits. In the case of refinancing, a loan agreement secured by real estate is no longer issued as a mortgage. Therefore, borrowers lose tax deductions.
When is it profitable to do mortgage refinancing? Such an operation is economically justified only in one case: if the new creditor has a rate of at least 2 pp lower than the previous one. Therefore, there are so many who want to receive refinancing.
The cost of the loan issue is of great importance. Is mortgage refinancing profitable? Customer reviews confirm that no renewal fee is charged. However, the original bank may take money for issuing each of the certificates. The average cost of such documents is 1 thousand rubles.
The borrower will have to pay for notarization of the transaction and services of the appraisal company on his own. The cost of processing the first document is 1.5-2 thousand rubles, and the second - 4 thousand rubles. Only after completing all the documents the encumbrance is removed and it is registered under the new agreement in the Regpalat.
Other types of refinancing
Re-lending is provided not only on a mortgage, but also on a credit card, cash loan or car loan. The fastest way is consumer loans, and the longest - mortgages. Collateral must be re-registered and insurance dealt with. 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 debited. The borrower needs to make an early repayment in the first bank and this should be done before the deadline for making a new payment.
Typically, the first two months, the loan rate at a new bank increases. However, another scheme may apply. 40-50 days are allocated for the repayment period of old loans. After this period, the rate increases. So, for example, they act in Alfa-Bank. When refinancing a loan, the owner of the salary card is served at a preferential 11.99%. He can draw up a new contract for 7 years and refinance debt in the amount of 3 million rubles. For non-payroll customers, the limit is reduced to 2 million rubles.
Refinancing is one of the key services of the bank. Therefore, serious competition has formed in the market. Some financial institutions provide online services. Alfa-Bank customers just need to fill out a questionnaire through the Internet bank and receive answers to all questions in the chat.
For preliminary calculations, online calculators are placed on the sites. When re-applying for a loan, you can increase the loan amount and receive a cash balance. Clients can pay off debts through online banking.
Permission from a financial institution to conduct an operation is not required. Banks are reluctant to accept the decision of customers to be serviced at other credit institutions. Nobody wants to lose profitable customers.
Banks themselves offer this service primarily to legal entities in order to obtain a client for comprehensive servicing and not only on a loan program. Individuals are more often credited on consumer loans. Re-issuance of secured loans is extremely rare.