Refinancing of a loan secured by real estate

To get a loan against the pledge of real estate borrower initially tries to choose a financial institution with the most favorable conditions for himself. However, over time, a more acceptable offer may appear in another bank. Then there is an opportunity to refinance the loan and get convenient repayment terms, lower monthly payment, other benefits. In this case, the borrower’s obligations are transferred to another lending bank.

Refinancing secured by real estate is not an easy process, it is more complicated than standard re-lending, it involves not only money, but also the reissuance (removal/imposition) of collateral encumbrance on the object. The property in this case is the collateral for the loan, its holder becomes another bank, which complicates the work. Let’s find out how refinancing against the pledge of real estate takes place, what it is, what conditions the bank puts forward, let’s determine the peculiarities of the registration process.

Refinancing procedure: how does it work?

So, the borrower decides to change banks and refinance the loan. It is necessary to act according to a certain algorithm.

First you need to find a bank that offers the best conditions and agrees to give the borrower a loan. Then you collect a package of documents, it includes:

• The civil passport of the borrower.
• A certificate confirming regular income.
• Title to the property.
• Technical passport for the object.
• Evaluation report.
• Certificate of registered members.

This is the minimum required, and other documents may be needed – it all depends on the object, as it may be an apartment, non-residential property, land plot, etc. For example, if a country house is taken as collateral, then in addition to the documents for the object it is necessary to present the papers for the land.

Then the bank starts the procedure of refinancing – draws up an agreement on repayment of the debt on the original loan. In this case, the current encumbrance is removed from the real estate object, the process takes up to 10 days.

At the next stage, the borrower and the lending bank conclude a new loan agreement, where the real estate acts as collateral. One lender is replaced by another, and the encumbrance, as in the previous case, will remain in place until the end of the borrower’s obligations, i.e. until the loan is paid in full. The refinancing agreement enters into force and the borrower repays the loan under the new terms and conditions.

Bank conditions when refinancing against the collateral of the property

When refinancing, the borrower is trying to improve the terms of the loan, and the bank has its own requirements. Refinancing conditions can vary – they depend on the financial institution – but there are a number of general requirements:

• Income level: the borrower must pay no more than 50% of his earnings for the loan.
• The borrower must have Russian citizenship.
• The age of the borrower – 21-65 years.
• Availability of a permanent and official place of work.
• Registration address: it is desirable that the borrower lives in the place of registration of the bank – in the same city or region.

You must also have a good credit history, the financial organization will certainly ask how you paid for the loan in the previous bank, whether you met the deadlines, whether you had delays, penalties for late payment, whether there are debts.

Another condition: you must have worked at your last job for at least 3-6 months – the bank wants to see that you are not on probation, you are not in danger of being fired.

The procedure for refinancing against real estate collateral

We tell you how to refinance a loan secured by real estate in Russian banks. But first, a tip: try to write an application to your financial institution to reduce the interest rate, reduce the monthly payment or increase the repayment period. What if they will meet you and relieve you of the difficulties associated with refinancing? If they refuse, proceed as follows:

• Find a bank that offers the best terms, immediately familiarize yourself with whether your property is suitable for the bank.
• Make an application on the official website of the organization or by visiting the office in person.
• Wait for the period of consideration of the application, it can be up to two weeks.
• After considering the application, collect a package of documents, wait for final approval.
• The bank draws up a contract, you carefully study it and only then sign it.
• The financial institution transfers the money to the “old” bank and reissues the collateral to itself.

After that, the refinancing agreement becomes effective, and you pay on the loan on terms that are more suitable for you.

Thus, before you decide to refinance a loan with real estate collateral, be prepared that it is a more complicated and lengthy process. The number of rejections also increases, as an object suitable for one bank may not be suitable for another. However, do not be afraid of re-lending, as some of the inconveniences in the reissuance are compensated by obtaining more favorable conditions.