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Extending a mortgage: your options at a glance
How and when can you extend your mortgage? What are your options?
Content:
Content:
- Extending your mortgage early can pay off.
- How do interest rates affect your decision to extend your mortgage?
- Not only is it possible to extend your mortgage, you can also increase or reduce it.
- Learn the possible pitfalls and risks of an extension.
- To the conclusion.
As soon as your mortgage approaches the end of its term, you can adapt the existing financing to your current circumstances. Your client advisor will help you do so. Here’s what you should know if you renew a mortgage or extend it before it ends.
Every fixed-term mortgage is subject to a specific term. Your credit agreement tells you when your mortgage or a mortgage tranche expires. Your client advisor will contact you at least a couple of months in advance to remind you.
Perhaps there are also private or professional reasons to adapt your mortgage to new life circumstances?
Before extending, you can consider the question of the desired term and the possibility of agreeing on several tranches. It is also possible to reduce your mortgage before extending it through amortization. Based on these considerations, you will find the right follow-up financing in good time.
Are there advantages to extending your mortgage early?
Are there advantages to extending your mortgage early?
With UBS, you can take out a follow-up mortgage twelve months before your current mortgage expires and secure a fixed interest rate for the entire term. If you believe that interest rates are likely to rise, this represents an interesting option. Earlier extensions are also possible on request.
You can also replace your expiring mortgage with two fixed-rate mortgages with different terms. This gives you extra peace of mind, as only part of your mortgage debt needs to be refinanced after one of the two mortgages expires.
How do current interest rates affect your decision to extend your mortgage?
How do current interest rates affect your decision to extend your mortgage?
Interest rates play a critical role in the decision to renew a mortgage. Historically, interest rates can fluctuate and vary, which has a direct impact on mortgage rates. These developments affect both variable rates, such as SARON mortgages, and fixed rates offered at renewal.
When renewing a mortgage, the following considerations regarding the interest rate environment should be taken into account:
- Current interest rates: Check how current mortgage rates compare to historical levels. Low interest rates can be secured for the long term by opting for a fixed-rate mortgage. If interest rates are comparatively high, however, many borrowers choose shorter terms. The interest rate is then more affordable than with a longer term. In addition, there is the option of extending the mortgage on more favorable terms earlier than usual, if interest rates have fallen again by the end of the term.
- Interest rate trends: Pay attention to general trends in interest rates. Do analysts expect rates to rise or fall? This can influence your decision as to whether to opt for a fixed or variable interest rate. SARON mortgages with a variable interest rate are ideal if interest rates are expected to fall.
What’s next for mortgage interest rates?
What’s next for mortgage interest rates?
Our interest rate forecast gives you information each month on current interest rates and interest rate trends – free of charge by email.
Curated monthly by mortgage experts- Free, unsubscribe at any time
When your mortgage expires you have three options
When your mortgage expires you have three options
Extend your mortgage like for like
The arrangements require less effort than when negotiating the first mortgage. The bank already has all the documents available and the mortgage amount has usually been reduced due to amortization.
Increase your mortgage
If you decide to extend your mortgage, we will also show you the options for increasing it. An increase can provide the required financial leeway if you want to renovate or remodel your home.
Adjust your mortgage strategy
Over the years, our life circumstances change, and so do interest rates. Maybe you’ve started a family, your children have become financially independent, your professional circumstances have improved or you are approaching retirement.
Together we can adjust your mortgage strategy to your current circumstances. We will check whether a different mortgage model is better for you or whether you should split your mortgage between different products and terms. Your mortgage could then continue in several tranches.
Potential pitfalls and risks when extending
Potential pitfalls and risks when extending
If you forgot your mortgage was about to end, you will miss out on the options that are only available if you take action early, such as early extension or a relaxed search for a suitable offer.
One potential pitfall for optimally extending a mortgage is missing the end of the term. If your mortgage expires without you having arranged follow-up financing with UBS, the mortgage will be due for replacement. With other providers, your fixed-rate mortgage can be automatically converted into a variable-rate mortgage. Depending on the development of interest rates, the variable interest rate may be higher than that of the expired fixed-rate mortgage. Every three months, the variable interest rate is adjusted according to the market situation, and can rise, fall or stay the same.
Fixed-rate mortgages always carry the risk that the interest rate may fall. If market interest rates fall and you have a fixed-rate mortgage, you will continue to pay the higher rate that was agreed at the time. The forward surcharge for an early extension will also remain in place, further widening the interest rate differential to the market level. Review the potential advantages and disadvantages for yourself. Perhaps you do not need the risk protection of a fixed-rate mortgage and can shoulder the fluctuating interest charges of a SARON mortgage.
Would you like to extend your mortgage?
Would you like to extend your mortgage?
We'll be happy to help you review your current circumstances and discuss the possibility of an extension.
The expression “time is money” is literally true when extending a mortgage. If you use the time before the end of the term to inform yourself, you will have more and better options as to how to proceed with the mortgage in the following years. Despite the rise in interest rates, there are good prospects for suitable, affordable follow-up financing if you prepare thoroughly.
Disclaimer
Disclaimer
