When should I renew my mortgage?
Is your mortgage about to expire? Towards the end of the term, you have to decide whether you should extend the mortgage early. Here's what you should bear in mind.
12.09.2022
iStock / Panuwat Dangsungnoen
1. When can I extend my mortgage?
The date from which an early extension of the mortgage is possible depends on the mortgage lender. This is usually 6 to 24 months prior to maturity of the current mortgage. It is therefore advisable to consider the so-called forward mortgage beforehand.
How a forward mortgage works
With a forward mortgage, you can lock in the current interest rate on a future mortgage. This lets you plan ahead, as you already know how much the next mortgage will cost you each month. The change in mortgage interest rates is uncertain. Therefore, financial institutions can charge a forward premium for early renewal.
2. When is the right time to renew your mortgage?
The right time to renew your mortgage depends on changes in mortgage interest rates and your need to plan ahead.
Scenario 1: Mortgage rates remain low
Do you expect mortgage interest rates to remain low in the long term? If so, you can hold off on renewing your mortgage . For most mortgage providers who work with Comparis' partner service HypoPlus, the following applies: if you renew your mortgage six months or more before maturity, you pay a forward premium (as at September 2022).
Important: Some banks require you to cancel a fixed-rate mortgage. If not, the fixed-rate mortgage is automatically converted into a variable-rate mortgage. However, the interest rates on variable mortgages are significantly higher than on fixed-rate mortgages. The notice period for fixed-rate mortgages is usually between three and six months.
Scenario 2: Mortgage rates tend to rise
Are you expecting mortgage rates to rise in the coming months? In this case, you should renew your mortgage before it matures.
Shop around for refinancing deals. Providers vary considerably when it comes to the forward premium amount.
Scenario 3: Mortgage interest rates are through the roof
Do you expect mortgage rates to spike? In such cases, you should consider a forward premium.
Watching interest rates pays off
You set yourself up for success when you refinance early. This allows you to remain agile and react quickly to good deals in the market.
Keep an eye on interest rates and have a mortgage advisor or broker explain providers' terms and conditions. Providers align their conditions with the market and the current procurement policy.
3. Does the interest rate really remain fixed?
Once the interest has been locked in contractually, it usually cannot be changed. If the mortgage interest rate is higher at maturity than at the time of closing, you will benefit. However, if it is lower, the contractually fixed interest still applies.
This article was first published on 09.07.2020