Few people can afford to buy an apartment or do not have enough money. A mortgage is a way out for those who decided to acquire their own square meters.
The interest rate set when taking out a loan will not necessarily be exactly the same for all 10-20 years. Banks provide an excellent opportunity to lower the rate and reduce the monthly payment. This is called refinancing.
Refinancing types
- Internally
- External
In the first case, you re-register the concluded transaction at the bank in which you issued the mortgage on more favorable terms for yourself. This is formalized by an additional agreement to the contract. In the case of an external one, you can refinance the mortgage at another bank. By completing a new agreement, you take out a loan from him at a reduced interest rate.
Mortgage refinancing pitfalls
The first minus of refinancing is the collection of documents. In fact, you will have to go through the same procedure again as when applying for a mortgage. Plus the costs that will inevitably follow when collecting, and the time spent. Also, you should not carry out this procedure if the amount is small or 2/3 of the mortgage has already been paid.
The second disadvantage is the impossibility of obtaining a tax deduction on the interest paid to the bank. But this is only in the case of external refinancing, when you take out a loan from another bank. This is also worth considering when refinancing. The amount of lost funds for interest must be subtracted from the total saved on reducing the interest rate.
But there is an opportunity to avoid the loss of funds on the interest paid. To do this, you need to carefully read the new agreement and find the phrase "mortgage refinancing" in the purpose of the loan. In this case, the tax authorities will take this into account, and your 13% on the interest paid to the bank will be returned without problems and delays. If you have forgotten or did not know about this, then in the case when a different wording is indicated, you need to go to the bank where you refinanced and take a certificate from them about the purpose of the payment with the correct and necessary indication. Next, take it to the tax authorities.
When applying for external refinancing, carefully select a bank. Now in the financial services market, there are more cases when the Central Bank revokes licenses from financial institutions. These are very unpleasant and problematic cases for borrowers, it is better to protect yourself as much as possible from getting into such situations.
Banks with full or partial state participation, proven over the years, are popular as standard. These are VTB, Gazprombank, Rosselkhozbank, Alfa-Bank, NOVIKOMBANK, AK BARS and others. Tinkoff Bank has earned a good reputation among commercial banks.
You need to understand that it is worth going through the refinancing procedure when the interest rate reduction is at least 1.5-2 percentage points. If there is a 0, 5-1 point, it does not make sense and is not worth the time spent. And it may entail costs that cover the amount by which the interest rate will decrease. Therefore, you need to calculate whether this pursuit of savings will turn into a monetary failure.
