A mortgage loan is probably the largest loan you will take out in your life. That is why it is important to negotiate well. When you consider that banks have years of negotiating experience, it is a good idea to prepare thoroughly. Are you ready to get the best terms possible? These tips will help you on your way.
- Do not focus on low interest rates
Too much emphasis is often placed on interest rates, while many other factors influence your monthly debt, such as the term and the variability of the interest rate.
- Choose a fixed capital or fixed monthly installments
Before you start negotiating with the banks, make the choice between a fixed capital repayment or fixed monthly payments. With a fixed capital repayment you pay less interest. On the other hand, you pay more in the beginning. That amount decreases the longer you pay off.
- Beware of tying
Be wary of hidden tying. Banks tend to try to sell you extra things that you don’t really need, strictly speaking. For example, you may get the impression that you are ‘obliged’ to take out a very expensive outstanding balance insurance with the mortgage loan. Or your bank agent will try to sell you fire or home insurance, a current account and a savings account at the same time. Don’t be tempted to incur extra costs that you don’t actually need.
- Go bank-hopping
The Romans already knew: betting on one horse is not that smart. So visit different banks and compare the different proposals. But the story doesn’t have to end there. Go to your own bank with the best proposal to formulate an even better proposal. Can they? Then take that proposal back to the bank that first had the best proposal to negotiate there too. Continue to play this until you have made the most of it.
- Build in collateral
Are you taking out a loan with a variable interest rate? Then you can limit that variability, for example by setting a ceiling so that the interest rate can only rise to a limited extent. For example, there is a + 2 / -2 loan, which increases or decreases by a maximum of 2%. In addition, in the event of an interest rate hike, you can have the term adjusted instead of the amount to be repaid. That is called an accordion loan. The only risk is that you will pay longer than you planned initially.
- Protect yourself
A loan is a heavy financial burden. If you involuntarily lose your job, you run the risk of not being able to pay off your loan. Fortunately, there is such a thing as the Guaranteed Housing Insurance, an initiative of the Flemish government.
This is a free insurance that offers an allowance of up to 500 euros per month. There are a number of conditions in terms of income and loan amount attached to this.
This is usually free of charge and it can save you quite a bit on the total costs of your loan. Always make a calculation first of what a possible transfer of your loan will yield you. Or have this done by an advisor.