Most people expect to save money by refinancing their mortgage, which is why the most important parameter is the interest rate. However, other conditions for obtaining a favourable interest rate are also very important. In many banks, you can only get a lower rate if you also take out another financial product – most often repayment insurance. After taking into account the cost of the related products, the bank’s offer may not be so advantageous. This is why you need to compare the offers of individual banks comprehensively and with the help of mortgage specialists.
The impetus to change banks may not always be just a better interest rate, but also, for example, the flexibility of the mortgage, the way it is managed or the bank’s approach and communication. Refinancing is an opportunity to tailor your mortgage to your needs. Read on to find out how mortgage refinancing works.
The best time to refinance
It is best to refinance your mortgage at the end of the agreed fixation period. If you decide to refinance during the term of the fixation, the current bank has the right to demand reimbursement of reasonable costs. “This is an administrative fee, which normally does not exceed CZK 2,000 for most banks. However, there are some banks that threaten you with a penalty if you refinance within the agreed fixation period. The amount of the fee can climb up to several tens of thousands of crowns,” warns Veronika Hegrová from the fintech startup hyponamiru.cz.
If you’re considering refinancing now, our mortgage specialists can advise you on the best options.
When to start looking into refinancing?
You will receive an interest rate offer from your current bank for the next period at least three months before the expiry of the agreed fixing period. Some banks send offers earlier on request. If you are not satisfied with the interest rate offered by your current bank and there is no chance of getting a better rate, secure offers from competitors as soon as possible. Refinancing should be started at least two months before the end of the fixation period. You can still get everything done in this time without stress. If you have less time, you may not be able to process the mortgage in time.
Veronika Hegrová adds: “If mortgage interest rates on the market are very low and the client does not want to let this good offer slip away, he can start refinancing two years in advance, which some domestic banks allow One bank even allows refinancing three years in advance. Almost all banks are then able to address refinancing as early as one year in advance. The only exception is mBank, which allows refinancing eight months in advance.”
Refinancing a mortgage is supposed to bring significant money savings. So do the math beforehand to see if refinancing is really worth it. If the difference between your current bank’s interest rate and a competitor’s is only minimal, refinancing is often not worth it. “This is due to administrative costs such as property valuation fees and fees paid to the Land Registry. The total time it takes to refinance must also be taken into account. These expenses may exceed the interest savings over the fixing period. Visually, it often seems that a tenth less interest is a lot, but in practice it can mean, for example, only a CZK 300 difference in the repayment. Everything has to be calculated. The higher the mortgage, the higher the savings, of course,” explains Veronika Hegrová.
How to save on refinancing? When you refinance your mortgage, you can save both money and time. An online mortgage provides a safe and fast way to complete the necessary paperwork associated with refinancing a home loan.
How to refinance your mortgage
Refinancing a mortgage should always be preceded by a detailed market analysis. This will show which bank has the best interest rate. The result of the analysis is not only a quantification of the savings of switching to another bank after taking into account all the costs associated with this process. When refinancing, the process is virtually the same as when first arranging a mortgage.
“The applicant for refinancing documents to the new bank the amount of his current income, an estimate of the value of the mortgaged property and also submits the original loan agreement. Some banks allow the proof of income in a simplified way, i.e. they do not have to provide proof of income, but if the conditions are met, it is sufficient to provide bank statements confirming the income. Subsequently, all the administration will be settled, the amount according to the balance of the original bank will be drawn on the date of the end of the fixation and the transfer of the lien to the land registry will be settled,” Veronika Hegrová describes.
When refinancing, certain fees must be taken into account. It is always necessary to pay a fee for the deletion of the lien of the original bank and the registration of the new bank at the land registry. For each registration you will pay two thousand crowns, so in total count on a payment of four thousand crowns. Some banks may charge fees for estimating the value of the mortgaged property and processing the mortgage. “If you decide to refinance your mortgage with Hyponamiru, most banks will arrange a free property valuation or reimburse you for this fee (note: it depends on the case). You can therefore save up to CZK 6,500. The mortgage processing fee is no longer as common with banks. If banks charge it, it is in the lower thousands of crowns. We can select a bank that does not charge this fee. With Hyponamiru, refinancing does not have to cost you any big money, you only pay the fees of the land registry,” says Veronika Hegrová.