What is the system of lending
Posted on Sep 5, 2000 08:15:27 AM
The system of lending is that the borrower takes a loan to a new bank, to repay its debt to the old bank and begins to pay off with your new lender under the new interest rates. Banks to such borrowers are more loyal because, firstly, they have already tested the previous credit institution, have a positive credit history, and secondly, has already tested the collateral, that is the object of real estate as collateral which is given credit.
The best option is refinancing at the same bank where the borrower gets a mortgage loan. This can reduce the costs of obtaining credit. This option is not always comfortable with banks that do not want to reduce the interest on those loans that were issued previously. In order to substantiate its decision, the borrower can get a decision on a loan with a lower rate with another bank. Presenting it after the bank lender, the borrower may request a change in credit conditions.
You can also use another method of lending – a collaboration with a mortgage broker. It can act as a guarantor to the bank, and then the second mortgage will be obtained prior to the payment of the first. The amount paid to a mortgage broker (from $ 500 to $ 2000) pays for itself pretty quickly if the difference in monthly payments on the loan would be $ 150-200.
The advantages of on-lending:
Increases term loan, increasing the amount of credit, lower interest rates to decrease monthly payments on the loan.
Some disadvantages of lending:
It will be necessary to re-pay the bank charges and other costs when you make a new loan agreement. Bank or credit union, in which the loan was originally issued can count the penalties for early repayment of the loan, although most banks have already refused such a way to “punish” the borrower.
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