Mortgage refinancing in the Netherlands

Ozkan Karakol

What does refinancing mean?

Mortgage refinance means that you replace an existing mortgage with a new loan. There are various reasons why you want to refinance their mortgages. 

Top reasons to refinance mortgage:

  1. Reduce monthly mortgage payments.
  2. Get better terms and conditions
  3. Switch interest type or rates
  4. Change residential mortgage to buy to let mortgage. 

Please note: You cannot rent your home with a residential mortgage without permission from the bank. If you plan to move away and want to rent your home, you must refinance your existing mortgage to buy to let.

How does a mortgage refinance work in the Netherlands?

When you buy a home, you apply for a residential mortgage. To close the deal between you and the mortgage lender, you sign a mortgage act at the notary. The mortgage deed contains a clause that regulates the terms and conditions of your loan. 

When you switch mortgage lenders, you break the agreement between you and the bank. Your mortgage lender could charge you a so-called penalty for breaking the contract before the fixed term ends.

Mortgage refinancing requires you to go through the application process and meet the new loan requirements.

Moving away and refinance my mortgage

Do you have a residential mortgage and plan to move away from the Netherlands? Then, you have few options:

  1. You can sell your home and repay your mortgage.
  2. You can refinance your residential mortgage to an investment mortgage. In this case, you can rent your home. Buy-to-let mortgages work differently than residential mortgages. If you decide to switch mortgage lenders, in most cases, you pay the penalty to your current mortgage lender. 
  3. If you move away for a fixed term because your employer is relocating you for no longer than two years, you can ask your mortgage lender permission to rent your property out. It is good to know that you are not allowed to rent your home with a residential mortgage. Your mortgage lender must permit you to rent your property out. 
Refinancing report

How does it work?

  • 1.Plan a 15-minute call with us. We want to learn more about your financial goals.
  • 2.We set up a refinancing report.
  • 3. We plan a second call to discuss your options.
  • 4. Free of charge.

Lowering monthly payments

Let’s say you took out a mortgage some years ago with a higher mortgage interest rate. During the last couple of years, the interest rates have dropped down significantly. You consider refinancing your existing mortgage but don’t know how it works. The way to move forward is to analyze if it makes financial sense. You could need to pay the penalty for leaving your current mortgage lender.  

Why is refinancing becoming more popular?

Low mortgage interest rates push homeowners to refinance their mortgages. 

The idea to reduce monthly payments can be attractive; however, it is essential to understand if refinancing is a good idea. Questions to ask:

  1. How much is my penalty?
  2. What are the current mortgage interest rates?
  3. How much closing fees do I need to pay?
  4. What conditions does the new mortgage lender offer?

Why should I refinance my mortgage?

In some cases, refinancing can benefit your existing financial situation. For example, you can reduce your interest rate and monthly costs.  Imagine you took a loan for 30 years with a higher interest rate. Now you can refinance your mortgage to 25 years with a lower interest rate.

However, refinancing is not free. You must pay the penalty to your mortgage lender because you decided to leave the deal earlier. The amount varies per lender because each lender offers different conditions.

Why is refinancing a bad idea?

Refinancing your existing mortgage can be expensive. First, you must pay the penalty to your mortgage lender because you decided to leave the deal before the fixed-rate term ends.

If you fixed your mortgage interest rate for ten years and decide to refinance after three years, you still have seven years remaining. Your mortgage lender could ask you to pay the remaining interest rate back.

Secondly, you must pay mortgage-related fees for your new mortgage, including an appraiser, the notary, and other mortgage closing fees.

So, it would be best to weigh the pros and cons of refinancing options in the Netherlands. Do you need help? Contact us to get up to date information about mortgage lenders and interest rates.