What happens to your mortgage loan when you sell your home?
Contents
- What is a mortgage loan?
- What happens to your mortgage loan when the home is sold?
- Tips when considering your loan
1. What is a mortgage loan?
A mortgage loan is a loan that you use to buy a house, apartment or other real estate. Your home serves as collateral for the loan, which means the bank has the right to sell your home if you can’t repay the loan. You repay the loan in monthly installments, including interest, over a predetermined term.
2. What happens to your mortgage loan when the home is sold?
2.1. Stap 1: Laat je bank het resterend saldo berekenen
Contact your bank to find out the exact amount of your outstanding loan. This is called the repayment amount, including interest and the reinvestment fee.
What if the sale price is less than the outstanding loan?
If the selling price of the home is less than the amount you still owe the bank, then there is an outstanding amount. This is called a residual debt.
Options in the event of a residual debt:
- Pay off residual debt immediately: If you have sufficient savings, pay off the residual debt immediately.
- Refinancing residual debt: Some banks offer the option of taking out a separate loan to pay off the residual debt in installments.
What if the sale price exceeds the outstanding loan?
If your home yields more than the outstanding loan, you’ll keep the surplus. You can spend this amount freely.
Surplus options:
- New home financing: Many sellers use the excess value to finance the purchase of a new home.
- Save or invest: Set aside surplus for future investments.
2.2. Stap 2: Overweeg je opties
2.2.1. Option: Pay off mortgage loan on sale
One option is to pay off your current mortgage loan and take out a new mortgage. Old loans usually have a higher interest rate than current ones. So nowadays you can borrow a higher amount for a lower interest rate. Just be aware that this has a cost:
- Mortgage fees: the outstanding amount and interest.
- Notary fees (filing fees): costs to have the notary cancel the old loan and enter into a new one.
- The reinvestment allowance: a lump-sum compensation for paying off your loan earlier than planned.
- Administrative fees at the bank.
- Residual debt if the sale price is less than the outstanding loan (see item 2.2.).
2.2.2. Optie: Hypothecaire lening overdragen naar een nieuwe woning
Some banks allow you to take your existing loan with you to a new home. This is called pledge switching. This also comes with a cost:
- Pledge exchange fees: notary fees to cancel the old loan and take out a new one.
- Credit review (filing fees): If your new home costs more than your current outstanding balance, the bank may charge a fee for it.
- Valuation: Sometimes banks require a professional valuation of your new home.
- Registration fee of 1%.
- Mortgage rights of about 0.5%.
- Administrative fees at the bank.
Terms of a pledge exchange:
- You have permission from your bank.
- The new home has sufficient value to serve as collateral.
4. Tips when considering your loan
- Consult your bank early.
- Check the term of the new loan.
- Check the terms of your loan agreement.
- Check the selling price of the new home carefully.
- Compare your current and new interest rates and terms.
- Consider taxes (registration fees, mortgage duties).
- Keep in mind all the costs associated with buying a home (moving expenses, administration fees with the municipality, etc.).
- Look at the energy standards of the new home: banks sometimes offer more favorable loans to energy-efficient homes.
- Get a repayment statement so you know exactly how much you still have to pay (including reinvestment fee and other charges).
- Note: Do not rely on estimates, but request specific fees and terms from your bank and banks you are interested in.
Sources: Construction and Housing
Would you like to cite this article as a source? Then use:
Stiasteny, L. (2024, Dec. 3). What happens to your mortgage loan when the home is sold? Apartment.com. Consulted on (date XX/XX/202X), from https://www.appartement.be/hypothecaire-lening-bij-verkoop-van-je-woning/
Related articles: