By paying off the outstanding balance of an existing loan, with the help of a new credit, you can sometimes be more advantageous. You can choose to take out the new loan with the same bank, or you can choose to do this with another financial institution. In addition to saving on borrowing costs, you can also change the original term or the monthly repayment terms of a loan by refinancing.
Refinance and save costs
By refinancing you can choose to change the original loan. Shortening the term of your old loan is very useful because you can then save interest. However, if you want to spend more per month, it is better to choose to extend the term of the new loan. After all, you pay less each month and the costs will be distributed over a longer period.
Financial consequences of refinancing
When you decide to refinance you must take into account certain costs. Refinancing will therefore only be worthwhile if you know how to earn back the refinancing costs. By refinancing at the same bank you usually have to count on file costs and in addition the payment of a reinvestment fee of three months interest on the outstanding amount of money that you want to repay early.
If you prefer to refinance with another bank, you will also have to deal with extra costs. With this you can think of:
- costs for the inspection: these are costs to remove the old mortgage registration from the register at the mortgage office,
- costs for registering the new mortgage,
You can of course borrow the costs of a refinancing. However, such costs will not be tax deductible.
Moreover, when making a comparison, you must take into account all kinds of additional changes if you decide to switch to another financial institution. A loan from another bank can mean, among other things, that the conditions attached to the new loan differ from your original loan. This could mean, for example:
- a more expensive debt balance insurance,
- opening an account with the new lender,
- direct debit from your salary,
- the holding of savings.
Fiscal consequences of refinancing
However, a refinancing loan means that you can still enjoy the same tax benefits as with your original loan. When refinancing you must therefore always pay attention to the date on which the original loan was taken out. In certain cases, when you take out a refinancing loan, you can claim a higher basic amount (old housing bonus) as a replacement for a housing bonus loan.
Furthermore, a refinancing loan will not open a new ten-year term for the supplements. The loan for refinancing will then replace the original loan, so that the number of years that you are entitled to supplements remains the same.
Refinancing can only give you a tax benefit or loss if the term of the loan is changed. After all, a discount means that you will miss out on a tax benefit for a few years and by extending the term you can gain a few years of tax benefits (under the old system).