Refinancing of loans

As usual, we are refinancing explain it simply, what is called "on the fingers." Thus, the borrower took out a loan. Took out a loan at a sufficiently high interest rates and a relatively short period of time. Regularly paid on the loan, as he sees that the interest rates at different banks are lower than in "his" bank. What does the borrower?

Of course, he can not "jerk", and pay as paid, but may try to reduce the interest rate, and give for the loan is less. How do I do? You can come to "own" the bank and ask them to lower interest rates. What will happen?

Option two:

- Or leave interest rates unchanged. (Of course! Interest - this is income of the bank! Who will give up on the income?)

- Either the interest rate will drop. (Miracles happen sometimes!)

Cases where the bank is ready to lower interest rates and when the bank is not ready to drop - a closer look.

Let's say the bank is ready to lower interest rates.

You can do this in two ways:

If the loan agreement between the Borrower and the Bank provides for changes in interest rates, the bank will simply change the interest rate and all. This application is made to the loan agreement.

If the credit agreement does not provide for changes in interest rates, the bank issues a new loan on different terms. Due to the new loan is extinguished the old loan and the borrower pays in accordance with the terms contained in the new credit agreement.

If "your" bank is not willing to lower the interest rate or some other way change the terms of the loan agreement, you can go to another bank and get a new loan there. Due to the new loan can pay off "their" bank continue to pay for a new loan on new terms.

Getting a new loan, through which you can repay the old loan, and just called the refinancing (or refinancing).

Complexity of refinancing

So, imagine that you have come to the bank for a new loan to get him to pay with your bank, where first credited.

And, let's say you need a loan of $ 100 thousand (maybe more). The amount - a substantial bank and is ready to give credit only for mortgages. But real estate is already pledged to "own bank": the one that has issued the credit and loan refinancing which we have. In order to "own bank" agreed to take a pledge, it is necessary that you have returned to him the money, but to a new creditor bank would give you money, you need to have you laid him real estate.

It turns out "vicious circle", which does not break so easily.

What to do?

Different ways of refinancing

- "The curve diagram" - for its implementation needs a "good uncle" (aunt, organization, winning the lottery, an unexpected inheritance, the treasure, the money from the business and so on).

If the "good uncle" there is, then everything is simple.

- The classical scheme of refinancing - a new bank gives the money to repay the money with the same creditor bank.

What is needed to refinance?

Usually (at least as assumed), the refinancing needed to reduce the interest rate and, consequently, reduce financial losses. But there was a case where we have to their customers refinanced loan, resulting in interest rate does not become smaller, but quite the contrary. And anyway, it was profitable.

This case struck me as so interesting that I want to tell us more about it. Asked me my former clients who have bought an apartment a year ago with my help. Addressed in order to buy another apartment so by renting a new apartment to rent, pay off the bank not only your money, but money and tenants.

And everything is good: the monthly income of my clients is enough to get a new loan and pay for it, if not a "but": my clients managed to collect consumer loans in different banks. So, given: There is a mortgage, obtained at 10 years old, under 11%.

Bank to pay the remaining 64 000 dollars. The monthly payment is 1100 dollars. There are four consumer credit, combined with 12 - 14% per annum, the balance of the debt which is 26 000. Although the amount of debt on consumer credit is not great, but since the loans were taken at 3 - 5 years, the monthly payment by him of 810 dollars.

Thus, the existing loan borrowers are already paying 1100 + 810 = 1910 U.S. dollars.

The task: to do so to replace all the existing loans to one and get the money for a down payment to buy another apartment.

A decision to refinance loans. Loans secured by the apartment, under which has already received a mortgage, you take another loan. The market value of the apartment on the date of refinancing - 260 000 dollars, so easy to take a loan of U.S. $ 130 000 at 12% per annum for 15 years.

Note:

The interest rate on your mortgage has become more: 12% instead of 11% per annum;

But:

- Borrowers were 130 000, of which 90,000 took to the "close" all the existing loans;

- there were

More than 35 000 in cash, which can be sent as a down payment when purchasing another apartment, (probably counting it all yourself, you decide that I was wrong because: 130 000 - 64 000 - 26 000 = 40 000.

But if there are overhead-lending.

- Payment of borrowers decreased: the total payment for all loans was 1910, became a form 1560.

- When before, with a bunch of loans, the banks did not want to see them as borrowers, now, when the loan is only one, glad to see them as their customers, many banks.

This incident occurred a couple of years ago. Now, in response to the crisis, the stakes rose, lending terms and refinance loans - have changed. So, unfortunately, what is described here now is not possible ...

While it is not possible ..