German Mortgage

Refinance mortgage: the basics

In this Refinance mortgage article, we’re going to focus on everything to do with mortgage refinancing.  In this guide you will find out:

  • What is refinancing?
  • What options do I have for refinancing my mortgage?
  • How do I refinance mortgage?

What is refinancing?


In most cases, the fixed interest period of a mortgage expires after 5, 10 or 15 years. At this point, there is usually a residual debt that can’t be paid off in a single sum. That’s where refinancing comes into play. The sooner you start looking for the cheapest refinancing models for your loan, the better your opportunities for comparing different providers and finding the best deal to refinance your mortgage.

What options do I have for refinancing my mortgage?


After the fixed interest period expires, you have the option of switching banks and renegotiating the loan terms. At the same time, you can adapt the new credit to your current personal and financial situation. Do you maybe want to change the loan instalments? Or do you want to make special payments?

There are two variants you can choose to refinance mortgage: the prolongation of the loan and the rescheduling of the financing. If you’re looking to secure an attractive interest rate while the market offers favorable conditions, you can do so with a forward loan. Using a forward loan, you can define future conditions in advance.

What is a prolongation?

With a prolongation, you accept your previous lender’s offer for the continuing financing of the mortgage. As the borrower, you sign a new interest agreement and the loan for the mortgage financing continues with the new conditions. In most cases, you will receive an offer with new conditions for the mortgage from your bank a few months before your fixed interest rates expire. As the borrower, this process is very straightforward. However, the offer from the previous financer doesn’t have to be the cheapest for refinancing your mortgage. That’s why you should carefully compare different loan offers prior to the expiration of your fixed interest loans and possibly refinance.

What is mortgage refinancing (Umschuldung)?

Mortgage refinancing involves concluding a follow-up financing for your property with a new lender. Refinancing your mortgage can save you a lot of money. When you refinance a mortgage, the new lender will take over the loan at the end of the fixed interest period and receives the mortgage as credit security. When refinancing, notary and land registration fees for the mortgage occur. However, they usually amount to just a few hundred euros and the costs to refinance mortgage are therefore manageable.

Even an interest advantage of a few tenths of a percent can create interest savings that are higher than the fees.

What is most suitable for whom?

In general, the following applies: The higher the remaining mortgage dept at the time of the follow-up financing, the more sense it makes to refinance with a cheaper loan offer. If the dept at the end of the fixed interest period is relatively low, then a switch for the remaining period might not be worth it. Maybe you even have the opportunity to pay the remaining debt with your own funds and don’t have to prolong or refinance.  

How do I refinance mortgage?


As the borrower, you shouldn’t be afraid to refinance your mortgage because the costs are much lower than most people think. LoanLink will compare credit offers and interest rates from countless credit providers for you and will find the best financing solution for the transferred loan. This comparison is free of charge and non-binding, meaning you are not obligated to refinance your mortgage. After signing the new credit agreement, the involved credit institutions usually handle the transfer of the loan among themselves. You as the borrower don’t have to do anything. That makes refinancing mortgages very straightforward.

Our LoanLink mortgage advisors are happy to answer any questions. Our goal is to help you find the best loan.

You may email us at [email protected] or by phone +49 (0) 30 5683 7535. You can also start with the LoanLink mortgage illustrator here:

Got a question about the real estate valuation or home purchase process for non-German resident in Germany? Contact us!

 

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