Getting a cheap mortgage: tips from Independer

Compare interest rates and conditions

The interest rates and conditions can vary significantly between the mortgage banks. So it’s important to compare interest rates and conditions of the different mortgage lenders. The large banks such as ABN AMRO, ING and Rabobank had a monopoly on the market for a long time. But there is now a growing number of lenders that offer a competitive interest rate. 

The risk of these cheaper providers is that they may no longer offer mortgages in 5 or 10 years. As a result, the interest rate they offer at renewal may be considerably higher than interest rates of providers that are still active. You could consider refinancing your mortgage. But it might not be possible. For example, if you become unemployed, you won’t be able to refinance your mortgage.

Saving by refinancing

During the term of your mortgage, interest rates can vary significantly. If mortgage rates decrease, this won’t benefit you if you already have a mortgage. But in some cases, you can lower your monthly expenses by refinancing your mortgage. Depending on when you do this, your current mortgage provider may charge you closing costs. This is a fee to compensate for the interest they lose. If your fixed-interest period has expired, you can almost always refinance your mortgage without closing costs. 

If you are considering refinancing your mortgage, first ask your current provider what the costs will be. Or have this calculated by a mortgage advisor. Then you know whether refinancing will benefit you. If you have a high interest rate and the current interest rate is low, the closing costs will often be high. When refinancing your mortgage, you sign a contract for a completely new mortgage. So the costs for a mortgage advisor, appraisal and notary fees should also be factored into the costs.

Take advantage of interest rate averaging

If your interest rate is fixed for a long term, the lower interest rates won’t benefit you now. Some banks such as Obvion and ING offer interest rate averaging. You pay the average of the current interest rate and your fixed interest rate. There is often a penalty for ending the fixed term early.

Interest rate averaging can only be done with your own mortgage provider. It can be cheaper than refinancing because you don’t pay the costs associated with taking out a new mortgage. Each bank has its own rules for interest rate averaging, and not every bank offers it (yet). There are €250-300 in administrative costs for interest rate mediation. The new term may be for a new fixed-interest period or sometimes for the remaining years of the contract.

Execution only or mortgage advisor?

Taking out a mortgage is not always straightforward. Your personal situation plays an important role in this. Are you self-employed? Going through a divorce? Or recently graduated and just started a new job? The rules that apply can vary as much as the situations. A mortgage advisor knows all the rules and can give you good advice. It is a service that you pay for. Since 2013, commission has been banned and advisors are paid directly. 

You can also choose to take out your mortgage yourself. You then skip the advisory session. Do you know your financial situation well and have some knowledge of mortgages? Then this option may be for you. When you choose a mortgage, you must take a knowledge test.

Even after that, you won't have a mortgage advisor to consult should any problems arise. The advantage is the savings. See our rates below.