Refinancing definition: refinancing a mortgage in Switzerland
Mortgage refinancing means replacing all or part of an existing mortgage loan with new financing secured against the same property. It may be arranged with the current lender or a new institution and may cover the entire mortgage or only a tranche that has reached maturity.
What is mortgage refinancing in Switzerland?
In Swiss banking practice, refinancing is not limited to obtaining a lower interest rate. For the incoming bank, it constitutes a new lending transaction: the bank reassesses the property’s collateral value, the loan-to-value ratio, your creditworthiness and your affordability. The existing mortgage certificate may be used as security by the new lender, but its existence does not give you an automatic right to refinancing.
Refinancing, renewal and changing lenders
Strictly speaking, a renewal generally extends a mortgage with the same lender, whereas refinancing legally and economically replaces the existing debt with a new loan. Changing banks therefore involves refinancing, but simply changing the interest rate or mortgage model does not necessarily constitute refinancing. Refinancing may also be partial when only one mortgage tranche is replaced.
