In 2019, the number of new mortgage loans increased by 30% compared to last year, notes the Central Credit to Individuals in its latest statistical report. And, most strikingly, among the number of new mortgage loans granted last year, 1/4 were refinancing loans, that is to say, loans in progress renegotiated by borrowers to benefit from a better rate or shorten the term of the loan. Refinancings increased by a total of 88% compared to 2018.
Do you have an interest in renegotiating your credit?
With rates having fallen further last year, it is very likely that many borrowers have every interest in asking their bank about possible refinancing. But for it to be interesting, there must be a difference of at least 1% between the old and the new rate, and this over a credit period of at least 10 years. “There remains a term of fewer than 10 years for the current loan, then more than a 1% rate difference is needed so that it is interesting for the customer, given the costs generated by refinancing”, says Patrick Segers, a mortgage broker at Segers & Associé.
But besides the rates, there is important to take into account the costs associated with this refinancing, which include not only application fees but also notary fees, mortgage registration… They can quickly reach several thousand euros if you change banks (release fees). In the event that the refinancing shortens the duration of the loan borrowers repay their loan before the term, and the financial institution can request a redeployment allowance which amounts to 3 months of interest.
Refinancing is therefore only justified if all these costs are lower than the benefit provided by the reduction in the rate that will be offered to you by the bank, and if there is a difference of at least 1% between the old and the new rate. for a loan of at least 10 years. “The refinancing is especially interesting during the first half of the repayment of the mortgage loan, explains Valéry Halloy, spokesperson for BNP Paribas Fortis, the leader in mortgage credit in Belgium; since it is during this period that the weight of interests is most felt. It is estimated that the remaining term must be more than 10-12 years, otherwise, the fee will be too heavy” he concludes.