Is it interesting to have your loan revised? With these guidelines you make the right choice.
The risk of a fixed interest rate
If you have opted for a variable interest rate when purchasing your home, you usually do not have to contact your bank yourself if you want to take advantage of a lower interest rate. Depending on the contract you have, the bank will automatically adjust the rates. It is different if you have a fixed rate formula. In that case, you chose security, in case interest rates would rise. At the same time, that interest rate can mean a block to your leg when interest rates fall.
Fortunately, it is possible via refinancing to take advantage of the remaining maturity at a lower current interest rate. The banks are not obliged to respond to your request for refinancing. However, few will refuse to go over the options with you. After all, they run the risk that another bank will respond to your request, so that they lose a customer.
Watch out for the costs
Be prepared to go to the bank with your request to review your home loan. This is because a number of costs are involved, which immediately make refinancing a lot less attractive.
For example, the bank will charge a reinvestment fee for the missed interest. This will amount to a maximum of three months’ interest on the capital to be repaid.
In addition, the bank can charge costs for the cancellation of the mortgage. The bank is also free to ask for file costs, which can amount to 650 USD. Adjusting your outstanding balance insurance will also be free of charge. In addition, if you decide to refinance with another bank, you must take out a new mortgage and take into account new notary fees, mortgage and registration fees. So be sure to check whether those costs outweigh the intended lower interest rates.
An advantage with refinancing is that you continue to enjoy the old – most advantageous – housing bonus, at least if you took out your original loan for 2014.
TIP : Here you can easily calculate whether it is interesting to refinance your loan. The simulator not only takes into account the interest rate differences, but also the costs associated with the new mortgage.
Rule of thumb: refinancing a home loan is interesting if the remaining term is at least ten years. Furthermore, the difference between the current and the new interest rate is at least 1% on an annual basis.
Think carefully before switching from a fixed to a lower variable interest rate. If you do this at a time when interest rates are very low, there is a real risk that your monthly repayment will rise as soon as the interest rate rises again.
Savings too much?
In addition to a falling interest rate, there may be other reasons to refinance your home loan. For example, after a financial windfall, you can use part of your savings to repay the loan in part, which will decrease the monthly costs. Of course, here you must again take into account the costs that a refinancing entails. You can also include that specific scenario in our simulator.