In plain words
Refinancing (рефинансирование, refinansirovanie) means taking out a new loan to close an old one. The new bank transfers the money to the old one itself, the old debt is closed, and from then on you pay the new bank on new terms. People usually do this to get a lower interest rate, a smaller payment, or to combine several loans and cards into one.
Refinancing is not the same as restructuring. Restructuring is a change of terms with the same bank when payments have become hard to make. Refinancing is a new loan that must be approved like any other.
When it pays off
- Rates have fallen. If you borrowed when the key rate was high and banks now lend noticeably cheaper, a difference of 2–3 percentage points can already bring real savings.
- Many payments are still ahead. With an annuity most of the interest is paid at the start of the term. If only a year or two is left, the benefit is usually small.
- Several expensive debts. Combining credit cards and loans into one loan with a clear rate is simpler and often cheaper.
Worked example
The remaining mortgage balance is 2,000,000 ₽, with 15 years (180 months) left at 16%. The current payment is:
2,000,000 × 0.16/12 / (1 − (1 + 0.16/12)−180) ≈ 29,374.01 ₽
Another bank offers 12% for the same term. The new payment is about 24,003.36 ₽. You save 5,370.65 ₽ a month, or roughly 966,718 ₽ over 15 years. The remaining overpayment drops from 3,287,323 ₽ to 2,320,605 ₽.
Subtract the cost of switching from these savings: the property valuation, insurance, the state fee for registering the pledge, and sometimes fees. Even if they add up to several tens of thousands of roubles, refinancing still pays off in this example. You can compare payments at different rates in the mortgage calculator or the loan calculator.
Calculate it yourself
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How to avoid mistakes
- Compare the full cost of credit (ПСК, PSK), not the rate. A low rate often applies only with insurance or until you bring a certificate showing the old loan is repaid.
- Don't extend the term without need. A smaller payment thanks to a longer term can mean a bigger overpayment in the end.
- Check that you don't lose benefits. A subsidised mortgage (for example, a family mortgage) can only be refinanced within the same programme; otherwise the rate will be at market level. The right to a tax deduction for mortgage interest is usually kept when a mortgage is refinanced, as long as the contract states the purpose of the loan.
- Mind your credit history. Every application is visible in your credit history. Don't apply to every bank in a row — choose two or three suitable ones.
In Russia, Kazakhstan and Belarus
Russia
You can refinance a consumer loan, a car loan, a mortgage and credit cards. When a mortgage is refinanced, the pledge is transferred to the new bank, so you will need a valuation, insurance and registration with Rosreestr, the property registration service.
Kazakhstan
In Kazakhstan banks also offer loan refinancing. Separate state programmes apply to mortgages — check the current terms with the bank.
Belarus
Refinancing exists in Belarus, but it is offered less often; the terms depend on the bank.
Sources: Bank of Russia financial literacy website «Финансовая культура» (Financial Culture)