The mortgage interest that you must pay monthly is determined at the start of the mortgage, and then after the fixed interest period has expired. Shortly before the expiry of the fixed interest period is an excellent opportunity to take a critical look at your current mortgage. When you take out a mortgage, you agree with the lender on a mortgage interest rate that you must pay to the bank for a fixed period. This can be a period of one month to thirty years. If you prefer a period of thirty years, you know how high your monthly costs are for the entire duration of the mortgage. However, most people will opt for a shorter fixed interest period. The best choice depends on your personal situation and future interest rate developments. It is best to contact your bank a few months before your fixed-interest period expires. This way you still have some time to take a closer look at the options.
Renew with the same bank
The most obvious choice is to extend the mortgage with your current bank. The bank will send you an extension proposal approximately one month before the end of your fixed-interest period. If you do not take action, the fixed interest period will be extended in accordance with the proposal. You can discuss the various options by contacting the bank. Given the short period before the current period ends, you no longer have the option to switch to another lender. You still have the option to first agree on a new short fixed interest period with your current bank, so that you can inquire with other banks.
You will have to pay more mortgage interest in the coming fixed-interest period
In the extension proposal from your bank, you may be faced with an unpleasant surprise. The mortgage interest payable can skyrocket. On the one hand, this may be due to interest rate developments, but it may also be caused by a higher rate that banks charge existing customers. They may have given you an extra discount when you took out the mortgage, which they are no longer willing to do. A small increase in percentage can cost you tens of euros more every month. You could have avoided these kinds of surprises by informing the bank early.
Switch to another lender
Switching to another bank can be expensive during the term of a fixed-interest period. The bank will charge penalty interest if the current mortgage interest rate is lower than the mortgage interest rate in the contract. This problem does not apply when the fixed interest period expires. At that time you have the option to switch to another bank. You must read this carefully in advance, because unfortunately it is not as simple as it seems. For example, with a savings mortgage you cannot easily switch to another bank. You must therefore be well informed before you decide.
How long should you fix the mortgage interest rate?
You can opt for the lowest possible costs, but that often means that you have to take certain risks. The cheapest option is generally the variable interest rate. In that case, the amount of the mortgage interest may differ per month. If you opt for a very long fixed interest period, you opt for certainty, but you have to pay for it. Most homeowners opt for a fixed interest rate of five to fifteen years.