When a fixed-interest mortgage period expires, many people are often shocked at what they will have to pay if they want to extend their existing mortgage. That is always more than customers have to pay who take out a mortgage for the first time. However, the damage can remain limited once a fixed-rate period of the mortgage has expired. Tips on what to do after a fixed-rate period on a mortgage has ended.
Two-track policy of the mortgage provider
At the end of a fixed-interest period, many people with a mortgage discover that many mortgage providers pursue a two-track policy. Many lenders charge two rates and not one as might be expected. Existing customers therefore pay much more than new customers. New customers are attracted with low interest rates, but existing customers have to pay for this. They pay more interest according to the so-called continuation rate. This interest difference can be as high as 0.7 percent. Add to this the increased interest rate and suddenly much more has to be paid for the same mortgage.
Mortgage interest expires: good preparation is half the battle
Someone who wants to be well prepared for the expiry of his mortgage must first find out when the fixed interest period ends. A preparation time of 2 months is minimum, so write that down somewhere. Find out when exactly the fixed-rate period of the mortgage ends. The mortgage provider comes up with a new proposal at the last minute and that is exactly what the law prescribes, namely one month. This means that there is little time left to make other arrangements, so start on time. During that period, see what other providers can do to provide a new mortgage.
- Someone had a mortgage of 200,000 euros.
- The old interest rate was 4 percent.
- The new offer from the existing mortgage provider is 6.5 percent for ten years. The monthly costs will therefore increase by almost 417 euros gross per month.
- Anyone who can get a lower interest rate from another mortgage provider will save a considerable amount over the next 10 years.
- Refinancing can therefore provide real benefits, but there is more than just an interest rate.
List everything when taking out a new mortgage, when the fixed interest period has ended
Anyone who has determined that the current provider’s offer is not favorable enough must already have other offers from others to compare. So do this on time, because it also gives you a good negotiating position.
Look at what the new quotes for a new mortgage mean in practice:
- Include the costs of taking out a mortgage with another provider. The closing costs alone amount to about 1 percent. Going to the notary and having a home valued quickly also costs a considerable amount and can run into thousands of euros.
- Look at the fixed interest period. Someone who receives a low variable interest rate, but for a short period of time, now has low monthly costs, but when interest rates rise, the costs suddenly increase drastically. Moreover, the continuation rate will not be available for too long.
- A new mortgage where the monthly costs seem low, do not have to be in practice. It may be that a term of another 30 years has been assumed. Mortgage interest is only deductible for 30 years, but there are providers who then assume 30 years. This means that the person in question must pay the mortgage amount gross.
Negotiate or have negotiated the amount of interest on a mortgage
Taking out a new mortgage or refinancing it is a financial situation that is of great importance for another long period. Negotiating this with the existing provider can provide relief, especially if there are other good offers available. There are also financial advisors who are happy to take over such negotiations for their clients. You have to pay for this, but it will certainly pay off in the long run.