Checking the interest rates on a regular basis on a regular basis is often a good idea. Should it then prove that you already have the lowest possible interest rate, you can be satisfied with this and it turns out that you pay unnecessarily much, it is time to consider different ways of acting.
How much difference does it make per month?
The interest cost of a mortgage is often one of the biggest expenses a family has each month. To show a little of what the differences will be, we shall here give some calculation examples of the whole. We choose to assume that you have a mortgage loan of USD 2 million and that the difference in interest rate would be 0.25%. Then your monthly interest cost would go down by USD 400 each month, which will be USD 5,000 per year. If you look at a longer perspective and you would have a mortgage with a higher interest rate for 10 years, this will be an extra cost of USD 50,000.
As you can see, this is a matter of quite a lot of money and especially in the longer term. Then how much money it saves for you is governed by the size of your loan. A smaller loan is our example, which does not give you as much savings per month. If you have larger loans instead, there is even more money to save.
How to change bank?
The actual exchange of lenders is not difficult in any way. This is when the new lender will help you with this process. Just contact them and they will solve everything. However, what will affect is what type of interest you have on your loan.
Variable interest rate
If you have chosen a variable interest rate or a so-called three-month interest rate, it is easy to change mortgages almost anytime. That is, as I said, was just to contact the new lender.
Fixed interest rate
If you have committed yourself during a period with your loan, there are some other rules that apply. It is never possible to prevent you from switching banks with your mortgage, as it can cost you money to do this.
If you want to change during the binding period, you will have to pay something called interest rate compensation. This is a compensation that will cover the lender’s costs for the remaining period of the binding period. The addition of this extra cost makes it doubtful whether it is worth changing the bank during the binding period. You can always think about it if you earn a lot of money from switching banks, but unfortunately, due to the interest rate difference, it is often not affordable.
If you choose to tie up parts of your loan, remember that it is difficult to change bank when the loan is tied. Since you will probably not transfer your loan to another bank, you will also end up in a slightly worse negotiating position when you have some tied up. It is more difficult to threaten to move on to another lender when you cannot move the entire loan.
The bond term normally varies from 1 to 10 years and when this period is over you can exchange your bank with your mortgage without any extra costs at all.
Negotiate with your current lender
A good tip is that after you look up the interest rates of the other lenders contact your current lender. If you tell them that you can get a lower interest rate from another lender and that you move your loan there if they do not lower their interest rate, it is quite likely that they will agree to an interest rate cut. Hopefully, they think it is better with a smaller profit than no profit at all.
You always have the opportunity to negotiate your mortgage interest rate with your bank. As mentioned, you can find a lower interest rate elsewhere and then tell your bank. It’s kind of like going into an electronics store and saying that you can buy a TV cheaper in another store. It may be that they lower the price to match their competitors. It is also clearly more likely that you can bargain on the price of mortgages than on, for example, a TV, because it is so much money.
Negotiating mortgages is a must since it is in principle always possible to get interest rate rebates as long as you have only a properly arranged economy. You can read a lot of good tips on negotiating mortgages in our articles on this.