Refinancing a mortgage in Belgium: reinvestment fee and costs

Refinancing and renegotiation

Wikifin describes refinancing as the early closure of your current loan and the immediate taking out of a new loan to repay it. The aim is in principle to obtain a lower rate, which reduces the total cost and the monthly instalments. The page’s example: a fixed-rate loan at 3% taken out five years ago may be worth refinancing if the current rate is 1.5%.

Before changing bank, Wikifin advises you to:

1. check the basic conditions (remaining term of at least 10 years, rate difference of at least 1%), comparing similar products: a fixed rate with a fixed rate;
2. negotiate first with your current bank, which may grant a rate reduction, sometimes in exchange for file fees;
3. if it refuses, compare offers from other lenders, because “the costs are significant”;
4. be wary of the variable rate: switching from a fixed to a variable rate may seem attractive, but the monthly instalment can rise if reference rates go back up. See the guide fixed or variable rate.

Some contracts allow certain elements to be renegotiated at the rate review. Otherwise, a review is only possible if the lender agrees, and it does not come free: the bank re-examines your file and may charge new file fees.

The reinvestment fee

It is a flat-rate compensation that lets the lender cover part of the interest it will no longer receive after early repayment. Wikifin writes that the amount is generally “a maximum of three months’ interest” on the outstanding balance, and that “the loan contract must expressly provide for the reinvestment fee”.

How to calculate it

Wikifin suggests this method:

1. Find the outstanding balance in the repayment schedule attached to the loan deed. For example, after five years, look at the 60th monthly instalment.
2. Apply the periodic interest rate (usually monthly) to this balance.
3. Multiply by three to obtain three months’ interest.

Worked example (Payotte’s calculation, to illustrate the method): for an outstanding balance of €150,000 and an annual rate of 3%, one month’s interest is 150,000 × 3% / 12 = €375. Three months’ interest comes to €1,125. Your contract and your bank give the exact amount.

Same bank: no fee

Since 10 June 2024, your institution “can no longer ask you for a reinvestment fee if you refinance a loan with the same bank” (Wikifin). In that case, the file fees may not exceed €175, that is half the maximum for a new loan. For a second refinancing within twelve months, they go back to the same amount as for the original loan.

What the fee is not

It is not included in the APR (TAEG), like default charges: do not rely on that rate to see it (Wikifin). Calculate it separately.

The other costs of a new loan

According to Wikifin, allow for:

• release costs (mainlevée), to remove the existing mortgage;
• mortgage costs to register the new one, as well as notary fees;
• file fees (maximum €350 for a mortgage loan);
• the cost of adjusting your mortgage life insurance (assurance solde restant dû / schuldsaldoverzekering) (see the guide on mortgage life insurance);
• possibly valuation fees, which must have been communicated to you and accepted in advance.

The costs of a new notarial deed

Notaire.be details the costs of a new mortgage that you bear: a registration duty of 1% and a mortgage duty of 0.30%, calculated on the capital and the ancillaries. The ancillaries are generally estimated at 10% of the capital borrowed, so both duties apply to 110% of the loan. On top come a flat-rate mortgage fee (€230 or €985 depending on the value of the mortgage), the notary’s fee, set by law, and administrative costs (searches, certificates, cadastral extracts).

Worked example (Payotte’s calculation with the rates above): for a new loan of €200,000, the base is €220,000. The 1% registration duty comes to €2,200 and the 0.30% mortgage duty to €660. The mortgage fee, the notary’s fees and the administrative costs must be added. Releasing the old mortgage has its own cost (registration duty, cancellation costs, fee).

One option: transferring the mortgage

Notaire.be mentions that a mortgage transfer avoids the 1% and 0.30% duties, with deed costs lower than the combined cost of a release and a new registration. Ask your notary and your bank whether this option is possible in your case.

Doing the sums

Compare the expected monthly saving with the entry cost:

1. reinvestment fee (zero if you stay with your bank);
2. release, new mortgage, notary and file;
3. annual saving on interest.

Divide the total cost by the annual saving: you get the number of years needed to recover your costs. Wikifin’s thresholds (10 years remaining, 1% difference) are a guide, not an absolute rule. See also the tax relief on the loan and your borrowing capacity.

Which professional to consult

Your bank gives you the early repayment statement and the repayment schedule. A credit broker compares several refinancing offers (see the guide on the mortgage broker). The notary prices the release and the new deed (see notary: fees and role).