Written and professionally reviewed by the Ailon Financing Solutions team
What is mortgage refinancing?
Recycling is the replacement of the existing mortgage with new terms. It is possible to refinance at the existing bank or switch to another bank, and it is possible to refinance the entire mortgage or only part of it.
The goal can be one of three: lower the monthly repayment, shorten the period, or reduce the total interest paid. It is not always possible to get all three together.
When should you check?
There are four distinct triggers:
Conditions or needs have changed. There is no fixed waiting period. Market conditions, income and goals can change, so feasibility is checked according to the latest numbers.
The interest rate in the economy decreased. If you took during a period of high interest and since then it has decreased, there is a gap to take advantage of.
Your income has increased. The bank prices risk. A better financial profile earns better terms.
The monthly repayment is burdensome. Even if you don't save in total, redeploying can restore air to your monthly flow.
The calculation that determines
Recycling is not free. The question is always the same:
Are the expected savings over the remainder of the period greater than the early repayment fee and the costs of the process?
Early payment fee Applies mainly to fixed interest routes. It is derived from the gap between your interest rate and the average interest rate in the economy today, and the balance of the period. In the prime route, there is usually no commission at all, so it is the most convenient for recycling.
If the calculation comes out negative, recycling is not profitable. A decent consultant will tell you this and not continue.
Why you should not recycle blindly
A common mistake: seeing a low interest rate in an advertisement and running to a lender.
The interest rate is only one of the parameters. A refinancing that lowers the interest rate but extends the period by ten years can dramatically increase the total amount of money you will return, even if the monthly repayment has decreased.
Always look at total refund total, not only on the monthly line.
Partial recycling
You don't have to touch the whole mix.
If you have four tracks and only one of them has become expensive, you can only recycle it. This way you avoid a repayment fee on routes that are worth keeping, and get the savings without paying for it twice.
This requires an understanding of what you have today, so the first step is always an accurate reading of the existing mix.
the process
- Feasibility test — Reading the existing mix and calculation against the repayment fee. free of charge
- Preparation of an updated portfolio — Income, liabilities and the state of the property as of today.
- interest rate tender — Applying to the existing bank and competing banks at the same time.
- Building a new mix — according to your situation and goals today, not five years ago.
- Signature and execution — usually faster than a new mortgage.
Debt consolidation through the mortgage
A separate case worth getting to know: if you have expensive debts such as negative credit, consumer loans or credit cards, you can consolidate them into the mortgage.
A loan against a property may be cheaper than some consumer credit, but a long spread may increase the total payment and the property is used as collateral. That's why the total cost is checked before and after the consolidation, and not just the decrease in the monthly payment.
The important warning: spreading short-term debt over a long period of time. If after the union you go into the red again, you will find yourself with two debts instead of one. The union only works in combination with order in the flow.
The bottom line
If you haven't checked the mortgage since a significant change in interest rate, income or your needs, you should compare the existing cost with a recent alternative.
The test costs nothing. The result can be tens of thousands of shekels.
Check if the cycle is profitable
Compare the existing loan with the alternative The mortgage cycle calculator and then check scenarios bMortgage comparison calculator. Fees and related costs must be included and not just the monthly repayment.
