The mortgage loan rates are starting to rise after the declines recorded over several years. Although this increase is still targeted at long-term loans and is quite low, it may be the most opportune time to renegotiate the rate of a mortgage loan before it’s too late. Renegotiate your mortgage loan.
However, it is important to thoroughly research in order to have several offers to compare. You should not only rely on the attractive rate offered by a credit institution to make your choice, but also take into account the additional costs associated with this new loan and the repayment of the old one.
The advantages of renegotiating your loan
Several advantages can be gained from renegotiating the mortgage loan. The first is the search for a more attractive interest rate, taking advantage of the current low level of rates. This option allows for a reduction in future monthly payments. It is also an opportunity to reduce the loan term if the repayment capacity or the reductions obtained allow it. 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 loan to repay another. This includes the reinvestment indemnity to be paid to the lending bank, which generally amounts to three months of interest, calculated on the total remaining capital due.
You must also bear the costs of releasing the old mortgage, or even closing file fees for some institutions. On the other hand, file opening and appraisal fees are also to be expected if you take out a mortgage loan with another bank, apart from the costs of the new mortgage deed.
Why renegotiate your mortgage loan now?
Mortgage loan 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. It therefore seems that 2013 is a good year to renegotiate real estate loans. Especially short-term loans, for less than 25 to 30 years, to take advantage of this still low rate.
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 wiser 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 seeing you leave if you are not satisfied. 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 lower by such a percentage. The best compromise would be, in this case, for the banking institution to propose taking out a new loan without having to release the old mortgage. Or the repayment of the old loan without requiring the payment of a reinvestment indemnity.
You can also look into offers from competing banks and other credit institutions. However, be cautious, as these establishments sometimes offer lower rates. But require, in return, the subscription of other products. This mainly includes fire insurance. That of the outstanding balance, salary domiciliation, or various financial products.
You must, therefore, calculate between what you will gain with the new bank. And the costs inherent in buying back your mortgage loan to know which solution is the most interesting.