See whether refinancing saves you money.

Do you want to refinance your mortgage and wonder what is involved? Refinancing is the way to keep the same mortgage while still lowering your monthly payments. You can also refinance because you want better terms, which may give you more options in the future.

Keep in mind that your current mortgage provider may charge an early repayment penalty. An independent mortgage adviser can help you calculate what that comes to. Together with the adviser you can lay out your options, so you do not overlook anything important.

Refinancing your mortgage: lower monthly payments

There are several reasons to refinance your mortgage. In most cases people refinance because of the lower monthly payments. Little has to change, except the amount you pay for your mortgage each month. That way you pay less to finance the same home.

Your monthly payment consists of two parts: any repayments on the mortgage and the interest payments on the remaining mortgage debt. The linear mortgage consists of a fixed repayment each month, together with interest on the outstanding mortgage debt. With the annuity mortgage there is a monthly annuity made up of a portion of interest and a portion of repayment. Unlike an annuity or linear mortgage, an interest-only mortgage has no mandatory repayments during the term.

An independent mortgage adviser can help you calculate the lower monthly payments. You can get an initial indication yourself by making a calculation online. Compare, for example, the options at ING, Rabobank and ABN AMRO. The mortgage interest rate can differ from one bank to another. It is wise to work out in advance what your monthly payments will be based on the new mortgage interest rate.

Refinancing your mortgage: better terms

There is a second reason to refinance your mortgage. Even when the monthly payments do not go down, it can be worthwhile to choose a different mortgage provider. The other mortgage may have better terms.

It is good to look at the moving arrangement (verhuisregeling) and the option to make extra repayments. With a moving arrangement you can take the mortgage with you free of charge when you move. If this is not possible, you first have to repay the old mortgage and then take out a new one. This can result in a penalty for early repayment, and taking out a mortgage again brings extra costs.

The option to make extra repayments is attractive to many homeowners. Mortgage providers usually offer the option to repay an extra ten to twenty percent of the principal per year, without penalty. This can be appealing if you have a financial windfall or receive an inheritance. If your current mortgage does not allow extra repayment, or not enough of it, you can choose to refinance the mortgage. A mortgage adviser can compare the terms of various mortgages together with you.

Refinancing your mortgage: do I pay an early repayment penalty?

Keep in mind that refinancing a mortgage can result in an early repayment penalty. That applies to SNS Bank, to Florius and to other mortgage providers. They charge an early repayment penalty if you want to repay more than the penalty-free threshold. Usually that comes to the ten to twenty percent per year mentioned above, relative to the principal.

To be able to refinance the mortgage you repay 100 percent of it, so that you can take out different financing. You can refinance with the same provider or switch to another provider. In both cases you have to repay 100 percent of the mortgage early. The size of the penalty that can be charged on this depends on several factors, but the remaining fixed-rate period is the most important one. If you fixed the mortgage interest for ten years and decide to switch after three years, the mortgage provider misses out on income. The early repayment penalty acts as compensation for these seven years of interest that the bank misses out on.

An independent mortgage adviser can on the one hand help calculate the size of any early repayment penalty, and on the other hand calculate how much refinancing saves you on monthly payments. That way you make the best choice.

Calculating your maximum mortgage when refinancing

Do you want to know exactly what it costs to refinance the mortgage and what it gains you in the long term? An independent mortgage adviser can help you with the full calculation. They take any early repayment penalty into account and include the extra costs of taking out a new mortgage. That way you get a clear picture of the refinancing costs and avoid any unpleasant surprises. Refinancing the mortgage can of course gain you a lot, such as lower monthly payments. If you manage to lock in a rate that is 1 percentage point or more lower, over a term of, say, another 20 or 25 years that can deliver a considerable benefit. Suppose you take out a mortgage with a lower rate with a fixed-rate period of twenty years, then on a mortgage of €250,000 you can save up to €50,000.* The independent mortgage adviser sets out the pros and cons for you, so you make a well-considered decision.

*We then assume an interest-only mortgage. If there are repayments in the meantime, the benefit decreases, because the monthly mortgage payments also fall.

Calculating your maximum mortgage online

You can calculate your maximum mortgage online. Both based on your current mortgage interest rate and based on the rate that is possible after refinancing.

Looking to increase your mortgage? Refinancing can be interesting then too. A lower rate can lead to more mortgage options, because the monthly payments turn out lower. It is worth making a calculation and then talking to an independent mortgage adviser about the options.

An adviser can ultimately make a complete overview with calculations based on your current mortgage, the options with other providers and of course your personal wishes. Whether that is to refinance your mortgage with another provider, or to take out a mortgage with the same bank at a lower rate or with better terms. An independent mortgage adviser tells you exactly how it works, how much you can borrow at most and what costs are involved in refinancing. That way you make the best choice for your situation.

Expert mortgage advice

Want to know more about your mortgage options? Request a free, no-obligation introductory consultation with a mortgage adviser from HypotheekBerekenen.nl.