However, while we see a higher cost of mortgage credit, borrowers who are considering seeking to improve their financial conditions through portability, must know different aspects to benefit.
For several years, financial institutions generated the possibility that clients with mortgage financing and who are up to date with their payments, could change their credit from one institution to another (refinance their credit), with the aim of improving financial conditions of your credit, that is, pay less for having the same or perhaps shorten the term of the financing.
Juan Luis Ordaz, Director of Citibanamex Financial Education, prepared a series of recommendations to consider that we reproduce below.
How can it be achieved? For example: if Pedro contracted a mortgage loan with the Bank A To settle it in 20 years with an interest rate of 12% per year, and after having done so, Bank B offers him an interest rate of 8% per year and pay in the same period of time, Pedro could request the loan in the second bank and thereby liquidate its balance with Bank A. This way, it would close its debt with the first, it would no longer owe a single penny and now the one who owes it is to Bank B, with which it would have a lower monthly payment and in total it would pay less interest for your home. Therefore, by paying less each month, you would have more money that you could use, for example, to advance payments on your mortgage and finish paying faster or invest it to continue growing your equity.
So, can I change my mortgage to another bank and pay less? Indeed. So it is important to know different offers, since you can find something that suits you.
As long as they offer me a lower interest rate, should I do it? Not necessarily. It is important to consider that when contracting a mortgage loan with another bank, a new deed will have to be made where it will be specified that you now owe the new bank. On some occasions the new bank will have to do a property valuation and on other occasions, it may charge you for the credit opening procedures. It should be noted that most banks offer promotions to facilitate and reduce the costs associated with the change, however, you may have to partially or fully cover these expenses. If these expenses are higher than what you will save by paying less interest, it is definitely not a good idea to switch your mortgage to the new bank. Otherwise, or if the additional benefits offered by the new bank are greater, it would be convenient for you; however, you would have to plan how you would cover the resources to pay for the refinance.
Among the benefits that banks grant to make refinancing more attractive for their clients are 0% commission for opening, free appraisal and even free, financed or discounted notary fees. So if you plan to refinance your mortgage be sure to do a comparison of the offers. Recently, the possibility of granting an additional amount of cash for free use along with refinancing, has become common among banks and allows clients to use that money for other personal or family projects, such as tuition, home improvements, among others. It is important that before making a decision you inform yourself of all the terms and conditions.
Another factor to consider is the total amount of interest that you will pay with the refinancing, compare it with the total amount of interest that you have left to pay on your current mortgage loan. You can know these by requesting amortization tables from both banks, you only have to compare the total sum of interest during the remaining term in both cases, the one that is lower will be the one that represents a better cost for your finances. Although this is not the only factor to consider, since although you can pay more interest with the refinancing, doing so could reduce your monthly payment, with which you would have more money available each month in case you need it.
If you are in a difficult economic situation, you can refinance to increase the term and help you reduce the monthly payment and not put your property at risk by stopping paying.
For example: if Pedro has 15 years to pay out of the 20 that were his original term, but due to his situation it is difficult for him to cover the entire monthly payment, he can with a new credit pay the balance and extend the term for another 20 years. Thus, the monthly payment would be less, although the total term would increase by 5 years. Here it is recommended that once Pedro’s financial situation improves, he make advance payments.
When choosing, review the interest rate, costs and associated commissions and compare the benefits offered by the institutions and choose what, in short, is best for you at this time.
Refinancing can also help you to contract a mortgage with fixed payments and have greater certainty. There are those who have a variable rate mortgage, which, as its name implies, implies that the payment can vary, decreasing or increasing, without prior notice. Also, some people have mortgages in investment units or in minimum wages, measures that vary according to inflation, so they tend to increase over time and thus the monthly payment can increase from one month to another. In these cases, you should refinance your credit to obtain a fixed rate, achieve greater certainty of the payments to be made, reduce the monthly payment and organize your money properly.
So now you know, refinancing has its advantages. Compare options and make accounts to make the most of them, concluded Juan Luis Ordaz.
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