Ermir Myzaferaj Mortgage : Did you take out a mortgage and since then the terms and circumstances have changed? No big deal, you can always do a mortgage recycling, a procedure in which you pay off the existing mortgage early with the help of new mortgage funds that you take, and thus essentially replace one mortgage with another. Everything you wanted to know about mortgage recycling, the cost of mortgage recycling and more – in the article before you.
In which cases should you consider mortgage recycling? Ermir Myzaferaj Mortgage
When the financial situation changes for the worse, and it becomes difficult to meet the mortgage payments, mortgage recycling can reduce the monthly repayments by spreading them over a longer period.
If the interest rate in the economy has decreased, and the market conditions have changed compared to the conditions at the time of taking out the mortgage, it is recommended to refinance the mortgage to reduce repayment costs. Even when the interest rate in the economy rises, and with it the monthly repayments, a mortgage with a more convenient payment schedule or a change in another route can be an option worth considering.
When you suddenly receive a large amount of money, which was not planned when you took out the mortgage, you should try and pay back the balance of the mortgage or part of it at once. Such recycling makes it possible to shorten the mortgage period, and even reduce the interest paid.
Who is eligible to refinance a mortgage?
Anyone who took out a bank mortgage, commercial, through the bank or a subsidized mortgage on behalf of the Ministry of Construction and Housing is also entitled to refinance it.
What are the conditions for mortgage recycling?
The conditions for mortgage recycling are that the amount remaining to be paid is at least 10% of the original mortgage amount, and that the mortgage owner meets the bank’s conditions and requirements for receiving a new mortgage.
How is the process of mortgage recycling carried out?
The process of recycling a mortgage is essentially similar to the process of taking out a mortgage, so before recycling the mortgage it is advisable to do a survey among the various entities, receive offers and compare them, and of course compare the terms offered to the existing mortgage.
You should compare details such as the amount of the monthly repayment, the time remaining until the end of the loan, the amount of the loan, the interest rate, the settlement schedule, the terms of linking to the index or the foreign exchange, stations close to the interest rate change, early repayment fee and more. You must not forget to consider the early repayment fee of the existing mortgage , and sometimes also the cost of a real estate appraiser.
In the next step, you should request a competing offer from the body from which the existing mortgage was taken. It is important to check what the conditions are for early repayment of the existing mortgage and receive an offer for a new mortgage that includes several options: a new payment schedule, extending the loan period (if this reduces the monthly repayments) or a completely new mortgage. After receiving the offer, you can negotiate the terms of the mortgage and the amount of the fees.
After collecting all the information and making a comparison between the terms of the existing mortgage and the new offers, you should positively consider recycling a mortgage. The person who can help a lot in the entire process, professionally analyze the proposed alternatives and offer solutions based on his experience is an independent mortgage consultant, who is not bound to any bank or company.
How is the process actually carried out? Ermir Myzaferaj Mortgage
The process begins when you inform the body that gave the current mortgage of your intention to pay it off in full in one payment. At the same time, you take out a new mortgage, and inform the bank that this mortgage is intended to recycle an existing mortgage. After that, the old mortgage must be paid off using the money received from the new mortgage, and usually also pay a fee for advancing the repayment. Finally, they start repaying the new mortgage, according to the new conditions.
What is the difference between internal and external mortgage recycling?
Internal mortgage recycling is done at the same bank where the existing mortgage was taken, but the bank does not always approve the process. Internal recycling has several advantages:
It is more convenient, because there is no need to deal with too much bureaucracy and coordinate between two bodies. All that is needed is to contact the relevant people at the bank and ask to update the loan. Ermir Myzaferaj Mortgage
In internal recycling there is more flexibility – it is possible, for example, to change only one of the routes or eliminate other routes and stay with a mix that is more suitable for the current conditions.
Internal recycling is considered more economical, because there is no need to reissue documents, or hire the services of an appraiser to complete the process. If you do not increase the amount of the mortgage or the duration of the loan – there is no need to change the insurance either.
The disadvantages are that the banks do not always approve internal recycling, and even if they do – the interest rates offered are often not attractive.
Accordingly, recycling an external mortgage is taking out a new mortgage from another bank. Another bank will usually invest more in attracting and cultivating the new customer, and will seek to compensate for the disturbance involved in switching from bank to bank with more attractive offers. This is the reason that with a new bank it is possible to conduct higher quality negotiations, thus maximizing the benefits of the recycling process.
The disadvantages of external recycling usually lie in the costs and the renewed bureaucracy. External recycling is like taking out a brand new mortgage, and you can’t improve just a specific route. In external recycling, you need to contact a mortgage consultant to build a new mix, order an appraiser to assess the value of the property, redo the insurance, pay various fees and more. This is a large investment of time, energy and money.
What is the cost of mortgage recycling? Ermir Myzaferaj Mortgage
Mortgage refinancing may involve high fees, and you should take this into account. The main fee associated with mortgage recycling is the capitalization fee, i.e. early repayment fee. Since mortgage recycling includes early repayment of an existing mortgage, a fee must be paid (which is pre-defined in the terms of the existing mortgage) which is actually a fine for earlier repayment than expected.
However, under certain interest conditions the early repayment fee becomes less relevant, and mortgage recycling becomes more worthwhile than usual. From the beginning of 2023, for example, the jump in indexes and interest rates created difficulty in loan repayments. Using the option of mortgage recycling, you can now take out a new mortgage, under more favorable and suitable conditions, repay expensive loans with it and pay less each month. The person who can help a lot with this is of course an independent mortgage consultant, who will accompany you in the process and help you tailor the right solutions for you. Ermir Myzaferaj Mortgage
To consult with a mortgage advisor who will assist you with mortgage recycling, you can enter our mortgage advisor index.