Mortgage refinancing is a process in which a borrowers takes out a new loan to pay off the one they currently have. Refinancing allows the borrowers to obtain better loan terms, such as a lower interest rate, a reduction in loan installments or a change in the repayment period. In Poland, mortgage refinancing is one of the most popular ways to reduce financial burdens.

What is mortgage refinancing based on?

Refinancing a mortgage loan involves transferring the loan from bank “A” to bank “B”. It is worth noting that it is not possible to carry out this process within the same bank where you have your current obligation. Refinancing a loan means taking out a completely new mortgage, which will be used to pay off the existing mortgage. What does it involve? With re-checking creditworthiness, completing documents both financial and related to the property. This is a solution dedicated to those who have taken out a mortgage on unfavorable terms, which will allow to reduce the amount of the loan installment, which translates into a lower monthly burden. In addition, it can allow you to obtain additional funds for investment or repayment of other liabilities.

When should you consider refinancing your mortgage?

  1. when interest rates fall – for fixed rate loans

One of the most important factors that affect your mortgage payment is the level of interest rates. If interest rates in the market are falling, it is worth reviewing refinancing the loan, as the new installment may be lower than the current one.

  1. when the financial situation changes

A borrower’s financial situation may change, for example, due to job loss, illness, divorce or a change in family circumstances. In such a situation, it is worth considering refinancing the loan to reduce the amount of the loan installment and relieve the burden on your budget.

  1. when the loan was taken out at a high interest rate

If the mortgage was taken out at a high interest rate or at an unfavorable margin, you should analyze whether changing banks would benefit you financially.

How many times can you refinance a loan?

If you have a mortgage and are considering refinancing, you are surely wondering if there are limits on the number of times you can do so?

There is no clear answer to this question. Much depends on the individual terms of the loan and the banks’ policies. In principle, a mortgage can be refinanced as many times as necessary to reduce the cost of repayment. In practice, however, banks impose certain limits on the number of such operations. It is worth noting that everything depends on the bank in which you have a liability. In some banks, refinancing a mortgage is possible after about 2-3 years after taking out the previous liability, since earlier repayment would involve paying a commission.

What steps to take?

Refinancing a mortgage is a good way to reduce the financial burden in the long run. It is worth considering refinancing a loan when interest rates change, your financial situation changes or you take out a loan at a high interest rate. Before deciding to refinance your loan, it is worthwhile to carefully analyze your financial situation and the policies of the bank with which you intend to use such a service and compare the costs associated with the loan. The assistance of a credit expert who can help you thoroughly analyze the cost-effectiveness of this process may prove crucial.