# Early Repayment Penalty: When Refinancing Still Pays

> An early repayment penalty does not have to make refinancing your mortgage a bad deal. See when refinancing still pays off, and how we calculate it.

https://www.belderbrandt.nl/en/mortgage-advice/early-repayment-penalty · English

An early repayment penalty can come as a nasty surprise when you want to [refinance your mortgage](https://www.belderbrandt.nl/en/mortgage-advice/refinancing-your-mortgage). Yet a penalty does not automatically mean refinancing is off the table. We look at the rate you pay now, the rate you could get, the costs of refinancing and the remaining term. That shows you what you actually gain at the bottom line.

## What is an early repayment penalty?

If you want to break your mortgage rate before the end of the fixed-rate period, the bank can charge compensation. The bank works out how much interest it misses out on because you break the contract early, and passes those costs on to you.

## When is refinancing worth it despite the penalty?

The key question is not how high the penalty is, but what you save afterwards. If the difference in interest rates is large enough, the savings can more than recoup the penalty and the other costs.

## What other costs play a role?

Beyond the penalty, there can be costs for things like advice, the appraisal and the notary. We include those in the calculation, so you are not just looking at the new interest rate.

## Financing the penalty into your mortgage

If the income and property value assessments allow it, costs can sometimes be financed into the new mortgage. That does not make them free. The costs become part of the mortgage and have to be repaid like the rest.

## Also look at the fixed-rate period

A lower rate is not automatically the best choice. We also look at how long you fix the rate for and what you expect rates to do. The choice has to fit your overall financial situation.

**From our experience: Paying the penalty and still lowering the monthly payments**

Refinancing was especially attractive in 2021, when mortgage rates were very low, sometimes around 1%. Back then a client came to us with a mortgage carrying a high interest rate. We could refinance it with another bank, but the client would have to pay an early repayment penalty. Because this was an old annuity mortgage from before 2013, we were able to reset the term to 30 years. We financed all the costs into the new mortgage: the penalty, the notary, the appraisal and our own fee. Even so, the client ended up paying less per month, with a rate that was guaranteed low for the next 30 years.

Want to know whether refinancing makes sense despite an early repayment penalty? We calculate the complete picture for you.