Refinancing (refinancování)
Paying off an existing mortgage with a new loan, usually at another bank and at a better rate. It is free at the end of a fixation and in the 3 months between the notice of the new rate and the refixation date. Otherwise the old bank may charge at most 0.25 % of the amount repaid per started year until the fixation ends, 1 % in total.
Example
After 5 years, CZK 3,543,000 remains to be repaid over 20 years. The current bank offers to refix at 5.80 %, a payment of CZK 24,976. Another bank offers 5.00 % and a payment of CZK 23,382, CZK 1,594 a month less. Over a five-year fixation that comes to roughly CZK 95,600; the cost of switching (a valuation at CZK 3,000–6,000, plus CZK 2,000 each to register the new lien and delete the old one) is recovered within a few months.
In practice
The new bank needs its own valuation and registers its own lien.
Start roughly 4–6 months before your fixation ends, as approval at the new bank usually takes 2–4 weeks from complete documents. Show the competing offer to your current bank as well; it often responds with a retention rate. The new bank sends the money straight to the old one, and only then is the lien transferred. If you wait for the letter with the new rate, you leave yourself just a few weeks to compare the market.
How it differs
Refixation means a new rate at the same bank, with no new agreement or valuation. Refinancing changes the lender and requires a new lien to be registered in the land registry, which makes it more demanding on paperwork. Consolidation is a special case in which other debts, such as consumer loans, are added to the new loan.
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