Transferring a loan to another bank – when is it profitable?

At the time of taking a long-term loan, ie in the case of private individuals primarily a mortgage, we usually sign a contract with the assumption that we will pay this loan to the end. However, it can happen over the years that it will be impossible or unprofitable for some reason. In this case, transferring the loan to another bank seems an interesting option. After all, it is not strange for us to transfer a mobile number from one operator to another, so why not do something similar with a loan? Is the transfer of the mortgage to another bank profitable? How do you transfer a loan to another bank?

Transferring a loan to another bank – when is it profitable?

Transferring a loan to another bank - when is it profitable?

Consider moving your loan in the following two cases:

  • timely loan repayment becomes a problem
  • market conditions have changed and loan profitability has decreased.

For example, due to random events, such as an accident, illness or job loss, repayment of loan installments in the current amount may at some point become impossible. It is worth thinking about restructuring it then. Unfortunately, the restructuring permit is the responsibility of the bank and will not always be granted. Then, the solution may be to transfer the mortgage to another bank while changing the repayment schedule. Over time, the conditions on the credit market also inevitably change – what is important, for customers in recent years, these have been primarily changes for the better. Not only does the interest rate change (both as regards fixed-rate loans and variable interest rates), but also more detailed loan terms. People who took out a loan earlier and are not affected by the changes may feel aggrieved because of this,

Credit transfer cost

Credit transfer cost

In the above cases, the transfer of the mortgage is likely to pay off, but not always. It all depends on what costs (and in what amount) associated with this activity will concern us. The fees associated with transferring a loan to another bank may include:

  • early repayment fee
  • property valuation cost
  • fees for making changes to the land and mortgage register
  • commission of a new bank.

Early repayment commission is now much less severe than it used to be. After three years of paying back the loan, banks can no longer charge any early repayment fees, and even up to this point, the maximum fee is 3% of the amount repaid. In the case of large loans, it will still not be enough, but it is worth remembering that before the 2017 Mortgage Act came into force, banks could impose an early repayment fee in any amount and throughout the duration of the loan.

Interestingly, it may turn out that we do not have to pay the bank for early repayment of the loan, and it is us. Banks are obliged to return the overpayment of all one-off fees that were collected with the loan, in proportion to the period by which we have shortened the loan repayment schedule. So, if we made an early repayment in the middle of the loan, we should be reimbursed half the cost of, among others, credit insurance.

As for the commission of the new bank to which we want to transfer our loan, many financial institutions are already deciding to depart from this practice. So it’s likely that this cost won’t affect us either.

How do you transfer a loan to another bank?

How do you transfer a loan to another bank?

Transferring a loan to another bank works on a relatively simple principle – simply in the new bank we choose, we are granted a loan in the amount that will allow us to fully repay the current liability. In practice, therefore, we no longer repay the exact same loan. If you are interested in transferring your mortgage, please note that you will also need to transfer the mortgage to a new creditor. The new loan may differ from the previous one not only by the interest rate and other fees, but also by the repayment schedule already mentioned. In practice, this means that it is possible to extend the repayment period compared to the previous loan, thereby reducing the monthly installment. In this way, you can effectively deal with problems with timely repayment of debt.

Currently, many different banks offer credit transfer, so you do not have to decide on the first better offer. It is worth considering and comparing as many of them as possible to find the one that will be able to offer the best conditions. It is worth remembering that as the years go by, changes in the credit market take place not only due to changes in the law, but also due to natural competition among many banking institutions.

 

 


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