Due to the low mortgage interest rate, you may be wondering whether it is interesting to transfer. Re-letting actually means that you take out a new mortgage that will pay off your current mortgage. But when is skipping wise?
When do you want to transfer a mortgage?
You cannot just do your mortgage transfer. The purpose of this is usually to ensure that your monthly expenses fall. But reshaping does not only offer benefits. You will also have to deal with a number of extra costs. Are you transferring your mortgage to the same mortgage provider, for example by choosing a new fixed-rate period? Then you can think of the following costs:
- Penalty interest
- Conversion costs
- Advice and brokerage costs
If you choose to transfer your mortgage to another mortgage provider, you will be faced with the following costs:
- Penalty interest
- Appraisal costs
- Notary fees
- (Higher!) Consultancy and brokerage costs
When do you want to refinance your mortgage? – Financial advantage
To determine whether re-transfer is interesting, you should therefore not only look at the new monthly charges, but also at the extra costs that you will incur. If you earn these extra costs back ‘in the foreseeable future’, then transferring is interesting.
Of course you decide for yourself what you consider to be ‘foreseeable time’, but financial advisors generally maintain a payback period of 5 years. Have you not yet recovered the costs within this time? Then re-transfer is not interesting from a financial point of view.
The table below shows how you can calculate whether transfer is interesting.
|Example 1||Current situation||Retype the same mortgage provider||Re-borrow new mortgage lender|
|Mortgage*||250,000 euros||250,000 euros||250,000 euros|
|Mortgage interest rate fixed for 10 years||5.5 percent||4.2 percent||3.5 percent|
|Monthly mortgage payments||1,146 euros||875 euros||729 euros|
|Extra costs when transferring||–||20,000 euros||25,000 euros|
|Advantage when resizing||–||271 euros per month
(1,146 – 875)
|417 euros per month
(1,146 – 729)
|Payback time||–||74 months
(25,000 / 417)
* For convenience, we assume a fully interest-only mortgage.
In this example, it therefore appears to be the most advantageous to transfer your mortgage to another mortgage provider. You will therefore recoup the costs for refinancing your mortgage in more than 6 years. If you choose to take out the mortgage with your own mortgage lender, the payback period is almost 5 years.