How we saved CZK 133 996 thanks to refinancing

Sometimes arranging a mortgage is a really difficult administrative process full of delivering documents, going to the offices and waiting to see what else the bank will come up with. Sometimes, on the other hand, it’s a very simple process that can be handled in two meetings in two weeks, and the result will bear unexpected fruit. Today I will describe the second option in a case study of a real client.

It all started when a client approached me with a desire to lower the interest rate on his recently completed mortgage. For the sake of his privacy, we’ll call him Karel.

Own housing and mortgage

Karel and his wife had been wanting to move into their own place for some time, so they were looking for the right apartment in Prague. In February of this year, they finally found him and the decision was made to buy the apartment. The price of the apartment was CZK 5 390 000. Karel tried to negotiate the price with the real estate agent, but since apartments for sale in Prague are literally disappearing before his eyes, he failed and preferred to conclude a reservation contract right away. As it is often the case with young people, they had not saved 20% of the purchase price, but with the help of their parents they put together at least 10%. The 90% mortgage for CZK 4,850,000 was then arranged. He and his wife visited a branch of their bank (CSOB). They took out a mortgage at 3.29%, which at the time was the standard rate for a 90% mortgage.

New solution

Since then, Karel has been quite actively interested in the mortgage market and in July he contacted me to ask if something could be done about his interest rate. If he had asked me a year ago, I would have told him no. I would tell him he needs to wait until the fixing period is over and then refinance. In his case, there were still 4 years and 5 months to go before the end of the fixation. But recently, the CNB came out and issued its
Recommendations
on the cost of early repayment of a mortgage loan. And as it happens, the banks started to follow this recommendation. So I arranged with Karl to scan their mortgage loan agreement and got to work. After two days during which I negotiated with various banks about the interest rate, I was able to send Karl a final offer. This was the refinancing of his existing mortgage with a new mortgage at an interest rate of 2.64% with a 10-year fixation.

How it all went down

The process itself was then very easy. We met with Karl and his sweetheart, filled out the appropriate Loan Application Form and I gave them the Income Certification Form to fill out for their employer. At the meeting we asked ČSOB directly online to quantify their loan as of the current date. The penalty for early repayment was calculated at CZK 0,- and the only thing Karel and his wife paid was an administrative fee of CZK 500 and CZK 1,500 for the instruction to delete the lien. We didn’t have to do a new appraisal of the market value of the property, so we had our mortgage approved in just a few days. So the second meeting was about signing a new deal. After signing, we took the necessary documents to the land registry and a few days later everything was ready.

Result

And now to the reason why we did it in the first place. Under normal circumstances, they would still be paying the bank interest at 3.29% for 4 years and 5 months. Thanks to the fact that we have significantly reduced the interest rate, the difference in interest paid over this period is CZK 133,996. The instalment has also been reduced by CZK 1 572 per month. Karl’s real savings are even higher, since at the end of his original fixation period he would owe the bank CZK 45 thousand more on the loan principal. CZK more than in the case of a new mortgage.

Price

And what did it cost Karl and his wife in total? Two meetings with me, a few emails and phone calls, 2 000 CZK in bank fees (mentioned above) and 1 000 CZK in land registry fees. That’s all. In short – a good deal.

Karl and I had never met before. He found out about me on the Internet. So we both didn’t know who we would meet in the end. A lot has changed since then and Karel decided to contact me with other financial products and we are both happy with the results of our cooperation.

If you are interested in seeing if we could work something similar out for you, please email me and I will be happy to provide you with a no-obligation offer.


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