Transferring a mortgage to another bank – Refinancing and consolidation loans

According to the report, there were 2.278 million active loan agreements for housing purposes in Poland, and the total debt related to them amounted to USD 420.691 billion.

However, sometimes it happens that you can’t cope with the loan repayment and you would like to reduce its installment, or simply the terms of your commitment are less favorable than those currently offered by banks.

What to do in that case? The solution may be to transfer the mortgage to another bank. 

What is the transfer of a loan?

What is the transfer of a loan?

Transferring a mortgage to another bank is called refinancing. It consists of repayment of an earlier, more expensive loan from the money obtained from a new, cheaper commitment. If you took out a home loan on unfavorable conditions, e.g. with a high margin, then you can think about refinancing, because your installment may be lower.

The bank, by granting you a new loan, assumes the repayment of your previous obligation. But remember, you’ll have to go through the entire funding application process, including a creditworthiness test.

Refinancing and consolidation?

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Refinancing and consolidation loans have one purpose – to help the borrower repay its liabilities. However, these are two different solutions. The financing is intended for the repayment of one specific liability, usually for mortgage loans. It consists in transferring the liability to another bank, but on more favorable terms.

Consolidation, on the other hand, involves several liabilities and involves combining them into one loan. If you have different receivables (e.g. credit card, overdraft, loans) in several financial institutions, the consolidation loan will combine all debts into one. The bank that grants you consolidation will pay off your debt, and you will now pay one installment, combining the sum of previous receivables. However, this solution also has drawbacks. 

When is the transfer of a mortgage to another bank profitable?

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You should consider transferring your mortgage to another bank when :

you complain about the unfavorable conditions of the commitment – the transfer of the loan may be beneficial if the interest rate on the current commitment is high. By refinancing a loan, you can negotiate better terms, e.g. thanks to a lower margin, your installments will decrease.

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