This year too, tens of thousands of Belgians will cancel their existing housing loan and take out a new one at the same time. Often at a different bank, but also arranged with the current financier. The fact that a fixed interest rate over the total duration was deliberately chosen at the time does not appear to be a moral obstacle to ending the agreement prematurely. And it should not be, because the borrowing interest has fallen more strongly in recent years than anyone could have imagined. There are currently even banks that offer an interest rate below 2.5 percent on new home loans. However, to qualify for the bottom rate of a financier, you will have to negotiate firmly.A comfortable fact here is that there is no pressure on you to get a loan off quickly.You and your family members are already high and dry in your own home.
Re-negotiate with your bank
The easiest and quickest way to make your home loan cheaper is to apply for a discount on the interest rate at the current bank. Thanks to the protective legislation on mortgage loans, you as a consumer negotiate from a relatively strong position. The bank may not refuse the loan to be repaid early (when you are about to switch to another bank), and is limited in charging extra costs for this (maximum 3 months interest on the balance of the loan). Your credit manager will therefore almost certainly offer a rate reduction.
How to conclude the most advantageous agreement: Doing your homework and smart negotiation are the tools here. Always ensure that you have one or more offers from other banks in your pocket and are well informed about the rates of your bank. As an existing customer you will probably not be eligible for the bottom rate, but you can try to get as close as possible to this. Re-negotiating with your bank is not really a refinancing. The bank will only prepare a new repayment plan based on the reduced interest rate, which will automatically decrease your monthly repayment. For the rest, nothing changes to the loan.
Refinance with another bank
In 2015, more than 80,000 families chose this option. Refinancing with another bank involves a new loan, under new conditions. If you still had to repay the old loan for ten years, you can opt for a ten-year term with the new loan (useful for measuring savings), but this is not an obligation.
How to conclude the most advantageous agreement?
You will also have to negotiate the interest rate with a new financier. Despite the fact that banks are willing to go to extremes when attracting new customers, they will never immediately offer the bottom rate. Therefore, request quotes from multiple institutions and show that you are up-to-date informed. Spicy negotiation can certainly result in a number of ‘tenths of percent’ extra interest discount.On a residential loan of 100,000 dollars with a term of 10 years, every 0.1 percent interest discount means a saving of around 550 dollars .
Bear in mind that refinancing involves a number of one-off costs:
- Costs for early repayment at your current bank (max. 3 months interest).
- File costs at your new bank (350 to 500 dollars ).
- Possible estimation costs (average 200 dollars ). In case a substantial part of the old loan has already been repaid, the new bank will often assume without estimation that the value of the home will cover the loan.
- Notary fees, for canceling the mortgage guarantee in favor of the old bank and creating a new one in favor of the new bank (900 to 1500 dollars ).
- Possible adjustments to the outstanding balance insurance.
Refinancing is therefore only interesting if the new interest rate is at least 1 percent lower than the current one, and the remaining term is at least 10 years.