Refinance or renegotiate your mortgage: your three options

Your mortgage is not forever. If rates change or your profile improves, you can renegotiate with your lender, move the loan to another lender or pay it off with a new mortgage. Each route has different costs and timelines. The right choice depends on how much you want to change and how much you will save.

• Renegotiation (loan modification): change terms with your current lender — rate, term, switching from variable to fixed.
• Transfer to another lender: in some countries, such as Spain, another bank can take over your mortgage; your lender may match the offer.
• Refinance with a new loan: the most expensive route, useful if you also want extra cash or to change borrowers.
• Calculate the total saving against the costs: cutting the rate by half a point on €150,000 over 20 years saves about €9,100.
• A written offer from another lender is your best negotiating tool.

Renegotiate with your lender

An agreement with your current lender to change the loan: lower the rate or margin, extend or shorten the term, move from variable to fixed, or remove conditions linked to other products.

It is the simplest route. The lender is not obliged to accept: your best argument is a binding offer from another lender. In Spain this is called a *novación* and is signed before a notary with reduced fees.

Move the mortgage to another lender

In some countries, another lender can pay off your debt with your current lender and take over the mortgage under new terms, without signing a brand-new mortgage. In Spain this is called *subrogación*: the new lender sends a binding offer, notifies your bank, and your bank has a short legal period to match it. If it does not, the transfer is signed before a notary.

Where this mechanism does not exist, the equivalent is a standard refinance with the new lender.

Refinance with a new mortgage

You pay off the current mortgage with a new loan, from the same lender or another. It costs more because the old mortgage must be cancelled and a new one registered, but it allows changes the other routes do not: borrowing more money (for example, to release the equity your home has gained), changing borrowers or consolidating other debts.

If your goal is releasing capital, see refinancing an appreciated property.

What it can cost

• Prepayment or early repayment fees on the old loan, according to your contract and local law.
• Closing costs of the new operation: appraisal, notary, registration, taxes or lender fees depending on the country.
• In Spain, the law limits the fee for switching from variable to fixed and the early repayment fees, and a *novación* or *subrogación* has reduced notary and registry fees.

Always ask for the costs in writing before deciding.

When it pays off

Calculate the saving in money, not in tenths of a point. Example: you owe €150,000 over 20 years at 3.5%. Moving to 3.0% lowers the payment from €869.94 to €831.90: €38 a month, about €9,100 in total. If the costs are a few hundred euros, it clearly pays off.

It pays off less when you have few years or little debt left, or when the new lender requires expensive linked products.

How to prepare

1. Find your rate, margin, fees and review date in your loan agreement.
2. Check your outstanding balance and remaining term.
3. Ask other lenders for binding offers.
4. Take the best one to your lender: it often matches without a transfer.
5. Compare the total cost of each option, including linked products.

Frequently asked questions

What is the difference between renegotiating and refinancing?

Renegotiating changes the terms of your existing loan with the same lender. Refinancing replaces it with a new loan, from the same or another lender.

Can my lender block a transfer to another bank?

In Spain it cannot block it, but it can match the other lender's offer within the legal period. If it matches, you stay with the new terms.

How much does switching from variable to fixed cost?

It depends on the contract and local law. In Spain, the fee for this switch is limited and disappears after the first years of the loan.

Can I borrow more when I change my mortgage?

Usually only by refinancing with a new mortgage, which requires a new appraisal and has higher costs.