Extending your mortgage. Adjust real estate financing to suit your changing needs.
If you extend your mortgage, your needs should take center stage. Perhaps you would like to simultaneously increase your mortgage or repay it? Find out the important aspects of follow-up financing.
Extending your mortgage upon maturity
If their mortgage will be maturing in the coming months, real estate owners have to think about follow-up financing. Key questions include those regarding the amount and type of mortgage: Should the mortgage be extended by the same amount again? Is the previously-chosen mortgage also suitable for the next few years? Or does another mortgage model suit current needs better?
Maybe you've started a family, you earn more or less now than when you took out the mortgage, you received an inheritance, or you are planning a large renovation project. All of these scenarios can influence how you extend your mortgage.
Renewing mortgages with partial repayment
When extending your mortgage, it is worth checking whether to repay part of your mortgage voluntarily. It is not possible to reduce the amount of the mortgage during the fixed term. However, you can repay part of the mortgage when renewing the mortgage, and therefore reduce the amount for the extension. If you've received an inheritance or have been able to save a larger amount, partial repayment might make sense.
Extending your mortgage and increasing it at the same time
When you renew your mortgage, in some cases it is possible to increase the mortgage amount. This applies as long as you still meet the affordability criteria for the increased amount. The reasons for an increase might be a planned expansion or a more extensive renovation, which you cannot finance from other sources. For instance, energy-related renovations make sense for older buildings, but they are also expensive.
In certain circumstances it may make sense to increase your mortgage when you retire. Usually income decreases when you enter retirement. If you increase your mortgage, you have more financial freedom. There is no guarantee that the bank will agree to an increase. But in the case of an upcoming extension, it is worth discussing your personal situation and the need for a mortgage increase.
Adjusting the mortgage model to your own needs
In addition to the time of the extension and the amount of the mortgage, the type and term of the mortgage should also be reviewed when extending. Fixed-rate and LIBOR mortgages have various advantages and disadvantages and can be a better choice, depending on your circumstances. The same applies to the term. Depending on your interest rate expectations and your risk profile, you may decide on a different mortgage for follow-up financing.
For example, if you are focused on security, a fixed-rate mortgage with a longer term is probably the right choice for you. However, if you would like the lowest mortgage and are prepared to deal with fluctuating interest rates, you would probably fare better with a LIBOR mortgage.
Assess follow-up financing on an individual basis
Because your circumstances, and therefore your requirements for the mortgage, may change, it is important to take a moment when renewing the mortgage and reconsider which mortgage is the right one for you. Take enough time to think through your needs. Consider factors such as the current interest rate situation and expectations for interest rate development. If you assume that interest rates will rise in the future, it may make sense to extend the mortgage early on, so that you can benefit from the currently low interest rate.