Mortgage rates begin to rise after declines for several years. Although this increase is still targeted at long-term loans and is quite small, this may be the best time to renegotiate the mortgage rate before it’s too late.
It is important, however, to prospect well to have several offers to compare. We must not only rely on the attractive rate proposed by a credit agency to determine its choice, but also take into account the ancillary costs related to this new credit and the repayment of the old.
The benefits of renegotiating your mortgage
There are several advantages to renegotiating the mortgage loan. The first is the search for a more interesting interest rate, taking advantage of the current low level of interest rates. This option reduces future monthly payments. It is also an opportunity to reduce the duration of the credit if the repayment capacity or reductions achieved allow it. Be careful, getting the lowest interest rate does not always mean that you are winning in the transaction.
In fact, various additional costs are to be expected when you take out a mortgage loan to repay another. This includes, in particular, the repayment indemnity to be paid to the lending bank, which is generally equivalent to three months’ interest, calculated on the total outstanding capital.
In addition, you must bear the costs of the release of the old mortgage, or even the closing fees for certain institutions. On the other hand, file opening fees and expertise are also expected if you take out a mortgage loan at another bank, apart from the costs of the new mortgage act.
Why renegotiate your mortgage now?
Mortgage interest rates in Belgium have historically remained quite low, despite an increase 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, including short-term loans, in less than 25 to 30 years, to take advantage of this low rate.
How to renegotiate your mortgage loan?
The mortgage loan can be renegotiated, either with the bank that has granted the loan or with other credit agencies. Before any decision, it is more advisable to collect a maximum of offers from the actors of the sector.
You can then contact your banker to ask him to lower your rate. This negotiation can be difficult because the bank loses money if it agrees to reduce its rate. On the other hand, she may see you leave her if you do not get satisfaction. According to the experts, 1% difference on the current rate and the new rate is necessary to come out winner.
It is rare for banks to agree to lower such a percentage. The best course of action would be, in this case, that the bank proposes the subscription of a new loan without having to lift the old mortgage or the repayment of the old credit without requiring the payment of a compensation of reinvestment.
You may also be interested in offers from competing banks and other credit agencies. It is important to be cautious, as these institutions may have lower rates but, in return, require the subscription of other products. This mainly concerns fire insurance, that of the remaining balance, the domiciliation of salary or various financial products.
As a result, you need to calculate how much you will earn with the new bank and the costs involved in buying back your mortgage to see which solution is the most attractive.