Thanks to the extensive use of the refinancing system by banks, the number of borrowers using loans has increased significantly in recent years. The conditions that banks offer at the time of applying for a loan may differ significantly from the conditions during the loan repairment period.
Conditions for refinancing are more favorable, and this leads to increasing demand among borrowers to take advantage of the opportunity to repair. With this banking service, all loans are transferred to one Bank, and the terms of payment and repayment are redefined, allowing customers to have an advantage.
What Is Refinancing?
The main essence of the method of refinancing is that all previously issued loans are closed at the expense of the new, received on more favorable terms. After the current loans are closed, interest rates and payments can be changed according to the new loan agreement.
Thus, loans taken from different banks can be replaced by a new loan with more favorable terms. Among the reasons why borrowers use refinancing are the following: dissatisfaction with banking services, lack of comfortable credit conditions and the desire to continue working with the Bank, where the borrower has investments.
Refinancing calculations can be performed using calculator applications. The system independently generates a table of results after entering data on the credits used. As a result of the formation of the table, there will be presented the advantages and disadvantages of future refinancing.
The calculation compares the indicators of possible losses such as: the change in the maturity of loans in a big way, the increase in monthly payments, accounting for 2% of fines for early repayment of the loan. All these indicators are taken into account when calculating the refinancing plan.
When calculating refinancing, it is important to calculate the interest rate difference between the two loans (the one you are currently paying and the future refinancing plan loan rates) and understand how the new loan will affect the amount of monthly payments. It is desirable that clients have asked for help from an employee of the Bank for the calculation of the refinancing plan.
Conditions of Banks for Refinancing
High credit confidence in the borrower is the main and main condition of the Bank for refinancing. Customers, who pay the loan on time, do not violate the maturity date, can provide guarantees for the debt, or have investments, are fully meet the expectations of banks. Banks that allow refinancing accept applications by checking the client’s credit rating and current payment status, for example, by examining the number and regularity of his Bank account transactions.
Banks providing refinancing inform the client of their decision, which is positive or negative after the evaluation of the documents in the client’s application. In case of a positive decision, the procedure of registration of a new loan agreement begins. Among the procedures that vary depending on the different types of loans, the Bank in the mortgage refinancing requests consents to the transactions according to the report provided by the property inspection.