Thinking about refinancing your mortgage? Calculate the costs

This tool is intended to offer insight into your options and gives an initial indication of whether refinancing may be financially beneficial. For a complete assessment of whether refinancing is suitable and worthwhile in your case, we always recommend scheduling a conversation with your mortgage adviser.
You can use this calculator if you have an annuity, linear, or interest-only mortgage (or a combination of these). If you have another type of mortgage, we recommend a no-obligation appointment to explore whether refinancing could still be advantageous for you.

Benefits of refinancing your mortgage

When is it wise to refinance your mortgage? Refinancing your mortgage to secure a lower interest rate can potentially save you thousands of euros. However, refinancing also involves costs. These may include penalty interest for paying off your existing mortgage early and fees for arranging the new mortgage. You may also incur notary fees (average €700), valuation fees (average €500), and advisory and brokerage fees (average €2,500). Do not forget additional costs such as the National Mortgage Guarantee (NHG) fee if applicable.

Refinancing only makes sense if the total costs are offset by long-term savings. You can use the calculator above to work out whether that is the case for you.

Refinancing and penalty interest

Penalty interest is typically the largest cost associated with refinancing. It is a compensation paid to your current lender for the interest income they will miss out on. For example, if your current mortgage interest rate is 4% and your fixed-rate period still has five years remaining, the lender would lose that income if you refinance now. Penalty interest is charged to offset that loss.

How to calculate penalty interest

Would you like to estimate your penalty interest in advance? Use our calculator at the top of the page. The charge is based on the difference between your current interest rate (for the remaining fixed term) and the rate you agree on for your new mortgage. This difference is then discounted based on the number of years remaining, since money today is worth more than the same amount in the future. The penalty interest is influenced by the following factors:

• The current interest rate on your mortgage
• The prevailing interest rate at the time of refinancing
• The outstanding balance on your mortgage—a higher balance generally means a higher charge
• Whether you are allowed to make a partial penalty-free repayment—most lenders allow 10% to 20% of the mortgage to be repaid per year without penalty
• The remaining duration of your fixed-rate period—the longer the term, the higher the penalty interest

How can you pay the penalty interest?

Penalty interest can be a substantial amount, and not everyone has the savings available to cover it. Fortunately, it is often possible to finance the penalty interest as part of your new mortgage. However, this is only an option if you have sufficient equity in your home—that is, the value of your home exceeds your current mortgage balance. Lenders will also assess your income and existing financial obligations to determine whether the higher mortgage amount is affordable. Keep in mind that the interest on the portion of the loan used to pay the penalty interest is not tax-deductible.

Refinancing without penalty interest?

Would you prefer to avoid paying penalty interest when refinancing? There are a few options to consider. You could wait until your current fixed-rate period ends. At least three months before that date, your lender must provide a new interest rate offer. You can either accept this offer or choose to refinance with a different lender. If you refinance during this review period, no penalty interest will be charged.

Switching to a different lender may still involve additional costs, including advisory and brokerage fees, valuation costs, notary fees, and NHG charges.

You may also be able to refinance without an upfront penalty through interest rate averaging. With this option, the penalty interest is incorporated into your new mortgage interest rate. The resulting rate becomes a weighted average of your old and new rates. In effect, you still pay the penalty interest, but the cost is spread across the duration of your new fixed-rate period. This can be especially useful if your current fixed-rate period is nearing its end.

Notary costs when refinancing your mortgage

Refinancing your mortgage also involves notary costs, typically averaging around €700. The notary will handle the cancellation of your existing mortgage deed, draft the new deed, and arrange registration with the Land Registry. The exact amount depends on the notary you choose, as fees can vary significantly between firms.

Advisory costs for mortgage refinancing

In addition to notary fees, you will also incur advisory fees when refinancing. These include the costs for mortgage advice. A mortgage adviser can help you determine whether refinancing is financially sensible for your situation by calculating, for example, how long it would take to recover the penalty interest through lower monthly payments. If you proceed with refinancing, expect to pay around €3,000 in advisory and brokerage fees.

Are Mortgage Refinancing Costs Tax-Deductible?
Refinancing your mortgage involves several costs. Fortunately, many of these expenses are tax-deductible, including the penalty interest. However, there are conditions. The new mortgage must be intended for the purchase or improvement of your primary residence (Box 1). If you take out an additional loan to cover the refinancing costs, the interest on that portion is not tax-deductible.