When you refinance your home loan, you exchange the old mortgage for a newer one. There are various reasons to refinance your existing mortgage.
Reduce monthly mortgage payments.
Get better terms and conditions.
Switch interest type or rates.
Change residential mortgage to buy to let mortgage.
When you buy a home, you apply for a residential mortgage. You sign a mortgage act at the notary to close the deal between you and the mortgage lender. 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.
The way to move forward is to analyze if it makes financial sense. 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. You could need to pay the penalty for leaving your current mortgage lender.
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 many closing fees do I need to pay?
4. What conditions does the new mortgage lender offer?
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.
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.
Plan a 10-minute call with us. We want to learn more about your financial goals.
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We plan a second call to discuss your mortgage calculations.
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