Collateral Transfer: It’s a new house and the same loan

Paying off a house takes a while—let’s say about twenty or thirty years. It’s quite common to want a new home with extra bedrooms for the kids while you’re still paying off the previous one. In such a case, it’s often best to do a collateral transfer to save costs. The notary then transfers the loan from the old house to the new one.

The magic must happen all in one day. You sign the deeds for the sale of your old house and the purchase of the new one simultaneously, ideally before the coffee gets cold. Well, that’s the ideal and easy scenario. There is some flexibility: a collateral transfer is also allowed if the purchase happens within two months and if the money from the sold house is kept in a blocked account in the meantime. Just discuss this neatly with the notary.

Another term for a collateral transfer is mortgage transfer. The conditions of your old loan remain the same, and you continue borrowing from the same bank. Only the property changes.

But wait. Interest rates are still lower today than before. Is it really advantageous to keep those old terms if you borrowed at 4% some years ago and now it’s 2.5%? Very smart, my dear Watson, but there are other factors to consider.

If you simply take out a new loan without a collateral transfer, the costs add up. These include:

Reinvestment Fee — This is the ‘compensation’ the bank asks for early repayment of your loan. Expect to pay a maximum of three months’ interest on the early repaid amount. You don’t pay such a reinvestment fee with a collateral transfer because you’re not repaying the loan.

Cancellation Fees — You must never sell a house that still has a mortgage on it. Understandably, because otherwise, the new owner would be in trouble if you couldn’t pay off that loan. The so-called ‘cancellation’ of the old mortgage costs between 0.3 and 1% of the initial mortgage-registered amount, plus the notary’s dossier fee.

Registration Fees — A new loan means new formalities. For the mortgage registration, you pay registration fees of 1% on the principal sum. Again, back to the cashier.

Outstanding Balance Insurance — You’ve already paid for this once, but now you have to take out a new one. And since you’re a few years older, it’s usually more expensive than the previous one.