Now, in these new restrictions, I will focus on one specific mortgage case – consolidation:
consolidation simply means transferring an existing loan to another bank . In the case of mortgage loans, this can be done at the time of mortgage fixation . Fixation refers to the period during which the agreed interest rate is fixed.
The limits also apply to consolidation cases. However, a distinction should be made between the ‘net’ transfer of a loan and the transfer of a loan with a credit increase.
As far as consolidation is concerned, banks do not have to monitor the parameters. However, irrespective of this, banks need to monitor whether there are circumstances in the client that increase credit risk. For example, there is a noticeable reduction in the applicant’s income , a significant increase in the applicant’s indebtedness, or a reduction in the pledged property price . Banks also while guarding differences in the past, and a new installment in the case of large fluctuations case should also examine in detail.
Talking about interest rates of around 1.79% pa , which were quite commonly available a few years ago . Now some mortgage rates are balancing at 3% . Such a difference in monthly payment may be significant.
|Mortgage amount||Due date||Interest rate||Monthly installment|
|CZK 2,000,000||30 years||1.79%||7 184 CZK|
|CZK 2,000,000||30 years||3%||8 432 CZK|
In consolidation with a loan increase (eg for small reconstruction, construction of a garage, etc.) it is again necessary to distinguish two cases:
- The first is the case of an increase in the existing mortgage balance by a maximum of CZK 200,000 or by a maximum of 10% . Then we proceed in the same way as in the case of “clean” consolidation.
- If the increase in the current mortgage balance exceeds the above-mentioned 10% or CZK 200,000 , then the consolidation banks should be treated as a new loan and the applicant or applicants must also meet the and criteria.
In times of rising interest rates with clients, we are also dealing with longer fixation periods and consolidation now that rates are even higher. Here it is good to know that some banks allow consolidation up to 2 years in advance . E.g. therefore, if the fixation date is 1 December 2020 , for some banks the rate can be booked as of 1 December 2018 and not expected to increase further. The client will thus sign a new mortgage loan (refinanced) now, but will only start repaying it at the time of fixation, ie in two years .
And what are the good tips for consolidation in the end?
Applicants solve a lot of interest rate . It is also good to look at other terms and conditions of a mortgage loan, which may result in a lower interest rate than the higher rate. These include, for example, various conditions relating to insurance , maintenance of a current account (its charging or the price of other services related to it, such as withdrawals from other ATMs or withdrawals abroad, free outgoing payments etc.) or other services. And of course for the consolidation case, the cost of the estimate or the price for the cancellation and deposit of the liens in the cadastre must also be taken into account. Leaving it in the current bank is free (in the vast majority of cases it is not solved), but some banks offer, for example, a free estimate .