Taking low mortgage rates with you when moving

House prices are on the rise again. So-called “second time buyers” who sell their old homes can often benefit from the increased value of their old property when purchasing a new house.  However, it’s important to consider what happens with the old mortgage, especially regarding the mortgage interest rate.  

Homeowners who, for example, want to take an old mortgage with a relatively low interest rate to a new home need to pay extra attention. This is likely to become even more important in the coming years due to a shift in the interest rate market that occurred two years ago.

 

Between 2016 and the end of 2021, mortgage rates were relatively low. At the lowest point, you could even lock in long-term mortgage rates at around 1.5%. Since 2022, however, mortgage rates have risen sharply, and they have now been hovering around levels of about 4.5% for some  time and in the last few weeks have dropped to below 4.0%.  

 

1) Timing of Selling the Old and Buying the New Home  

 

If you buy a new home before selling your old one, you need to check with the lender whether you can carry over the old mortgage rate. It is important to notify them in time. With some lenders, you may lose the option to transfer the old rate if you notify them too late.  

 

On the other hand, you should also be cautious if you sell your old home first, pay off the associated mortgage, and then buy a new home. It’s also important to know whether the lender enforces a certain time period between paying off the old mortgage and finalizing the mortgage for the new home at the notary. 

 

2) From an NHG Mortgage to a Non-NHG Mortgage 

 

It’s possible that you initially took out a mortgage with NHG (National Mortgage Guarantee), which under certain conditions covers the repayment of any residual debt if homeowners face financial difficulties and can no longer afford the mortgage. NHG mortgages typically come with a slightly lower interest rate compared to mortgages without NHG insurance. 

 

But what if you want to take out a mortgage for your new home without NHG coverage? In this case, there’s usually an interest rate surcharge compared to the NHG mortgage, and you’ll need to check the terms regarding carrying over the mortgage interest rate when moving.  

 

3) What About the Affordability Test Interest Rate? 

 

One factor that can affect old mortgages when moving is the remaining fixed-interest period. If this period is less than ten years, lenders use a relatively high “affordability test interest rate” of at least 5% for determining the maximum mortgage amount. This could reduce your total borrowing capacity. 

 

In such cases, taking out a new mortgage with a longer fixed-interest period based on current rates may be more practical, especially considering the maximum mortgage amount.  

 

4) Divorce: Splitting a Low Mortgage Interest Rate is Usually Not Possible  

 

We also would like to point out that in the event of a divorce, it’s usually not possible to split the mortgage and allow both partners to keep the low mortgage interest rate. At many lenders, only one of the two partners is allowed to retain the low rate, and the other must give permission for  this.  

 

5) Switching to Another Lender  

 

Carrying over a low mortgage interest rate automatically means staying with the same lender when moving. However, if you have a relatively short remaining fixed-interest period and your current lender’s rates are less attractive than those of the competition, it might be worth considering switching to another lender. 

 

Overall, if you have a low interest rate on your current home it is always worthwhile to discuss your situation and possibilities with one of our mortgage advisors. 

Request a free intake meeting

 

If you would like to discuss the current housing market and mortgage landscape, you can always reach out to us or to Nick from Your Dutch Home for an online intake session. These sessions are always free of charge.