Interest on new mortgages is lower than interest on past mortgages. Banks are in favor of this. The higher your interest on your mortgage, the more the bank can earn. Who does not hear, the old mortgage pays more, though not. How can you reduce interest on an existing mortgage?
What are the interest rates on new mortgages?
This is how interest appears on new mortgages (processed as of 16 October 2017). These are interest-free insurance policies through the bank or other products that make the mortgage more expensive.
There have been positive changes in market conditions since this article was written. At the moment, interest on mortgages starting at 1% pa begins.
At the same time, several banks have been reimbursed for early repayment fees. This means almost zero costs when switching to another bank.
This makes it even easier to get a good deal on an existing mortgage because banks are more prone to agree. And when there is no other option, in another bank on a new mortgage you get better conditions without a fight.
What interest do you have on your mortgage?
Is it lower or higher than what banks currently offer?
Banks will never offer a cut in interest rates beyond the anniversaries of fixation by themselves. They mainly earn their clients’ passivity.
I firmly believe that if you read these lines you belong to the other group of people and you want to pay less and you are willing to do something about it .
On old mortgages, interest rates are much higher
There is no rarity to meet people who have interest rates above 3% pa on their mortgage. Sometimes it was a good interest. Now it’s twice as much as normal rates. By reducing interest, you can save quite decent money.
This is e.g. interest on the mortgage from 2014. It is a picture cut out directly from the loan agreement. And that was still quite a good rate at that time.
How much you can save on lowering mortgage interest
In this table I made a 70,000 € mortgage conversion for 30 years with different interest rates.
Note. : For the sake of simplicity and clarity, I have compared the mortgages with the same repayment period, the same principal of the mortgage since the repayment and the same interest throughout the repayment period. This conversion is used to demonstrate that lower interest will bring a lower installment, lower reimbursement and thus a decent mortgage saving.
The difference between the best and the worst rate in the previous recount is huge. It looks like this:
- The monthly installment difference is € 82.60.
- The difference in total overpayment is € 29,770.27.
When it comes to comparing the best and worst interest, it looks pretty good. There is a difference, but 2.3% pa does not look so threatening at first sight. However, when we compare the result, which is a few lines higher, it is a disaster. There is a higher interest to feel really good.
Never pay more to a bank than you have to. Even if you only need to save 30 € per month, it is worth it anyway.