The lending rates have taken a pleasing course in recent years for the borrowers. They have continued to sink. It has never been cheaper than borrowing money from the bank. However, this is annoying for those who have older loans. Here, the interest rates are far too high. A loan refinancing can help solve the problem. However, it is important to plan very carefully. Not always, such a refinancing is really better. And it is all too easy to fall into the trap of believing that an appropriate step is beneficial, but it is in fact disadvantageous.
A refinancing is actually nothing but the rescheduling of a loan. You are making use of your right to early repayment of a loan and, ideally, solving an old and expensive loan through a young and cheap loan. It is crucial for refinancing that the new loan is actually cheaper than the old one. Otherwise, you pay for it – and you do not want that.
In addition, there is another pitfall: You should not have a negative entry in the protection community for general credit protection (private credit), because the new loan is considered once as a second loan. If the private credit does not suit them, they can spoil the new loan. In such a case, you argue to the bank that it is a refinancing operation that de facto pressures the debt. If you borrow both loans from the same bank, the corresponding reasoning should be caught without major problems.
You have to calculate exactly when you refinance a loan. On the one hand, a prepayment penalty for the old loan is due. Apart from real estate loans, this is a maximum of one percent if the loan runs for more than a year. If the term is less than twelve months, the corresponding value is 0.5 percent.
In addition, however, all other charges and fees must be taken into account. However, the biggest trap lurks in the area of maturity. As a very simple example, if your old loan runs for another year at three percent interest, it is much cheaper than when you take a new loan with two and a half percent interest, but over four years. Never forget that interest rates are payable annually.
Therefore, do not fall into the maturity trap, but compare the relevant offers with a loan calculator that explicitly takes into account the repayment period. In an emergency, if you do not trust the results you’ve received, you’re accessing a real estate loan calculator. Due to the long maturities, refinancing is quite normal in this sector. Accordingly, the tools have the option to display the repayment duration with all values in detail.
By the way: If you indicate to a bank that you want to repost, the bank should automatically provide you with a detailed budget. For example, this should also include the cost of credit default insurance for the loan refinancing. If you do not receive this service, look for another donor.