Mortgage rates are starting to rise again after several years of decline. Although this increase still targets long-term loans and remains quite low, now might be the best time to renegotiate your mortgage rate before it’s too late. Renegotiate your mortgage loan now.
However, thoroughly researching and comparing multiple offers is crucial. Don’t just rely on an attractive rate from a credit institution; also consider the additional costs associated with the new credit and the repayment of the old one.
The advantages of renegotiating your mortgage
Several advantages can be gained from renegotiating a mortgage loan. The first is seeking a more attractive interest rate, taking advantage of the current low level of rates. This option allows for the reduction of future monthly payments. It is also an opportunity to shorten the loan term if repayment capacity or obtained reductions permit. Be careful, obtaining the lowest interest rate does not always mean you are winning in the transaction.
Indeed, various additional costs are to be expected when you take out a mortgage to repay another. This includes, in particular, the prepayment penalty to be paid to the lending bank, which generally amounts to three months of interest, calculated on the total remaining capital.
You must also bear the costs of releasing the old mortgage, and possibly even the closing costs for some institutions. Additionally, there are opening and appraisal fees to consider if you take out a mortgage with another bank, apart from the costs of the new mortgage deed.
Why renegotiate your mortgage loan now?
Mortgage interest rates in Belgium remain historically quite low, despite an increase recorded since July 2013. This rate increase is slow and mainly affects long-term loans. Therefore, 2013 seems to be a good year to renegotiate real estate loans, especially short-term loans of less than 25 to 30 years, to take advantage of these still low rates.
How to renegotiate a mortgage loan?
The mortgage loan can be renegotiated, either with the bank that granted the loan, or with other credit institutions. Before making any decision, it is wise to gather as many offers as possible from industry players.
You can then contact your banker to ask them to lower your rate. This negotiation can be difficult, as the bank loses money if it agrees to reduce its rate. On the other hand, it risks losing you if you do not get satisfaction. According to specialists, a 1% difference between the current rate and the new rate is necessary to come out ahead.
It is rare for banks to agree to such a percentage decrease. The best compromise would be for the bank to offer a new loan without having to release the old mortgage, or to repay the old loan without requiring the payment of a prepayment penalty.
You can also look at the offers from competing banks and other credit institutions. However, beware, as these institutions may offer lower rates but require the subscription of other products in return. These mainly include fire insurance, insurance on the remaining balance, salary domiciliation, or various financial products.
Therefore, you need to calculate what you will gain with the new bank and the costs inherent to the repurchase of your mortgage to know which solution is the most interesting.
