Depth Analysis: Can Refinancing a Mortgage Loan for Business Use? My Friend Got Himself into Trouble...

Author | Xia Xin Yu

Publisher | Glad to See Finance

It's interesting that I once wrote an article called "Mortgage Loan Observation" and gave myself a hole to fill, saying that the next issue would be published soon. The next issue was supposed to write about my friend who started doing "Bridge Financing" in February - using bridge funds to pay off his mortgage loan early and then applying for business loans (mortgage-backed business loans) to repay the bridge funds.

I knew about this because he first came to me, asking for help to smooth out bank relationships and agree to repay his mortgage loan early. According to him, when he went to the bank himself, the branch manager used the "Three-Board Hammer" to reject him, leaving him feeling miserable.

**This classic "Three-Board Hammer" is: no credit limit, no authorization, and penalty fees!**

Don't get it wrong, "Glad to See Finance" knows that my friend wants to engage in irregular activities. I didn't help him with that. However, he was quite patient and went through a lot of trouble: waiting for an available credit limit, asking someone with the right authority to approve it, and accepting penalty fees without hesitation.

He might have thought "It's better to let go than to hold on" because, after all, penalty fees + bridge costs + intermediary fees + company fees add up. It seems that he could save more by switching to a new loan rather than continuing with the existing one.

Then I didn't forget to fill in the blanks, but my friend asked for help again: this time it's about his business loan, which was halfway approved but not actually disbursed!

This kid really took out all his savings, and the wolf didn't get caught.

I'm writing the second part of this story, but suddenly a new plot twist emerged.

What happened during this process? As it turns out, regulators had already discovered the hidden dangers of these loan substitution activities and issued warnings. Banks may say they have tightened their approval processes for business loans, but in reality, they are quite clever - as long as you've just repaid your mortgage loan, they won't approve any new business loans!

Further investigation revealed that banks have various ways to prevent this type of loan substitution. For instance, some banks directly close the application channel for early repayment of mortgages; others have taken away certain branch managers' approval powers.

For the second part of the "Bridge Financing" story, it's said that some banks have even taken away their branch managers' business loan approval powers and sent them to the central bank. Of course, many more banks have strengthened their review processes for business loans, including pre-loan reviews, post-loan reviews, and third-party agency cooperation.

So, I don't know if my friend's business loan was eventually approved or not - it's a lucky break that his bank is so strict. If he had done something wrong, like using the funds for personal purposes instead of actual business operations, he might have even faced penalties.

Actually, business loans and consumer loans are prohibited from flowing into real estate, and the regulations are one-track-minded. It's an old saying that people should be straightforward and avoid engaging in irregular activities.

Recently, business loans have been more affordable, with banks offering favorable rates to encourage small and micro enterprises to operate normally. However, this is not meant for individuals to use as a means of buying or refinancing real estate - it's actually meant to help actual businesses.

But some people might still find ways to abuse these loan terms, and that's why banks are always vigilant.

Finally, I want to say a few words about my friend's experience with the middleman who convinced him to come up with an "intelligent plan".

He thought that since his mortgage loan was quite high (5.25%), he could get a better interest rate for his business loan (around 3.5%). The middleman promised to help him set up a new company and even arranged for the registration process - for a fee, of course.

The plan was as follows: first, prepare by going to the bank to agree to repay the mortgage loan early; second, find a third-party financing agency to provide bridge funds to pay off the mortgage loan; third, use the paid-off mortgage property as collateral to apply for a business loan; and fourth, once the business loan is disbursed, he would need to avoid scrutiny by the bank on how the funds are used.

Unfortunately, my friend got stuck at this step and couldn't get his business loan approved. He originally thought that if the business loan was successful, he could use it to repay the bridge funds, but no - he would need to go through a few more hoops before paying off the bridge funds.

This article first appeared on WeChat Public Number: Glad to See Finance. The views expressed in this article are those of the author and do not represent the position of Hexun.com. Investors should act at their own risk.