Refinance the mortgage or not?
When taking out a mortgage, you opt for a fixed-rate period. The mortgage interest rate is fixed for this period. For example, it may be that someone opts for a fixed-rate period of 10, 15, 20 years or even for 30 years.
Suppose someone chooses 15 years, then this person pays the same mortgage interest for 15 years. Mortgage interest is the interest that people pay on a mortgage. If one opts for 30 years, then this mortgage interest rate remains the same for 30 years.
Transfer within a fixed-rate period
That e can of course be very favorable if the mortgage was taken out at a time when the interest rate was very low, but what if the interest rate has actually decreased compared to the current interest rate that you have?
Can you simply refinance a mortgage during that fixed-rate period so that you start paying a lower mortgage interest? Sometimes re-skipping can be beneficial, but there are also disadvantages.
A lower interest rate
Even if a mortgage is taken out, you actually just take out a new mortgage. A new mortgage therefore means new conditions, but also new interest. So if this mortgage interest rate is much lower, that can be an advantage.
With the new mortgage you first have to pay off the debt from the old mortgage. Here the conditions come into play. Perhaps these conditions have been one of the reasons that you have opted for a new mortgage.
Retype the old mortgage
We are taking out a mortgage and refinancing the old mortgage before the fixed-rate period expires, compensation is generally requested for early closing. This is because the mortgage provider misses out on income.
Because a period was agreed, they had expected this income. The reimbursement that you have to pay can sometimes increase considerably, so check this first. At the same time, it is not possible to enter the market, but it is also a question of posting to the world in the new mortgage then the interest is not deductible.
The reimbursement amount itself is. Then there are a few other additional costs, namely the appraisal costs for the new mortgage. The notary fees and possibly the consultancy and / or brokerage fees. You can deduct many of those costs from the tax.
Because you are going to pay less interest, you will get less tax benefit and if you move within three years, you often do not reimburse the costs that you incur when you transfer.
The new mortgage
However, refinancing a mortgage can also bring many benefits, even though you may have to incur additional costs. It is of course always nice if you are going to pay a lower mortgage interest. This often influences your repayment and so you feel it every month in your wallet.
If it is an attractive low interest rate you can also secure it for a longer period of time. Maybe you first had 10 years and you want to increase the fixed-rate period to 20 or 30 years if it is very low. Sometimes the low interest rate comes at a time when you actually want to renovate the home or you need a new kitchen or other large expense.
Then you can increase the mortgage amount at the same time when you transfer the mortgage. Of course, the mortgage provider will first see if your income permits this. The mortgage provider must approve this increased mortgage amount. They then put this in a construction depot.
When can you not reschedule?
In some situations you cannot refinance the mortgage. For example, if your current mortgage is higher than the value of your house. That is why a valuation must always be done. In such a case, you actually have a residual debt and you may not transfer from the mortgage provider.
Even with a savings mortgage it is better not to transfer. It wouldn’t be smart either. You pay interest on the loan here and you receive money on the part that you have accrued. So if you go to a lower interest rate, the interest on the accrued part also becomes lower. The interest for both parts is always the same.