How to renegotiate your mortgage?
For several months, mortgage rates are down. A few years ago, a mortgage over 20 years proposed a rate approaching 5%. Today, the same product is available at a rate of up to 1.6%. An evolution that justifies the increase in renegotiation requests from
requests for renegotiation by borrowers who wish to be able to enjoy these much more attractive rates. “The low rate effect continues, requests for renegotiation of credits flock again,” said Mael Bernier recently, director of communication of Meilleurtaux Le Parisien newspaper.
3 basic conditions before launching
Above all, three mandatory criteria must be met in order to access a renegotiation of a mortgage. First, be in the first half of the credit. That is, people with 20-year credit should be within the first 10 years of repayment. Next, it must be verified that there is at least 0.70 to 1 point difference between the credit rate contracted and the rate currently charged.
For example, current rates are around 1.60%, so the current credit will need a minimum rate of 2.60% in order for renegotiation to be possible. Finally, the outstanding amount must be at least 70,000 euros. If these 3 conditions are met, then it is interesting to go further in the process.
Convince your bank to renegotiate your home loan
Since 2008, every individual is free to ask for the renegotiation of his mortgage with his bank. However, no institution is obliged to access this type of request, which is why preparing your application is essential for the smooth running of this type of operation. The first reflex will be to contact his bank to express his wish. The institution can either refuse to propose a solution or propose a new rate.
This proposal will only be valid for one time. A period during which it may be interesting to inquire with other banks to find out what is proposed and thus compete to convince the lending institution to start making a more interesting offer. Then free to the particular to accept the offer which is made to him or not.
Pay attention to costs
When the renegotiation request ends with the lending organization, two scenarios can be put in place. The amount of the monthly payment may remain similar to that practiced with the previous rate, it is then the repayment period of the credit will be reduced. The amount of the monthly payments can also be reduced in order to regain purchasing power, it is then the duration that remains the same.
However, this type of operation generates action and changes in the terms of credit, and therefore costs. The latter relate to early repayment fees, the introduction of new guarantee fees, application fees, brokerage fees, etc. These additional costs will be, for example, greater if a mortgage is used as a guarantee.
To limit spending and ensure that the game is worth the candle despite the gap between the previous rate and the new practice, requesting a commercial gesture to the bank to reduce the bill can be a good idea. In fact, the whole operation is based on what the banking establishment will be able to propose in order to achieve a win-win compromise, when we talk about renegotiation, so it’s not just about the rate, but all the agreement that will govern the terms of the new credit that will be put in place.
And if the bank refuses?
When the bank refuses to offer a more attractive rate or is not sufficiently inclined to propose a suitable request to both parties, it is always possible to go to another institution to make a credit redemption.
I simulate a credit redemption! to be reminded
The repurchase of credit makes it possible, on presentation of a file of request, to regroup all the outstanding loans in order to benefit from more interesting rates. In this way, the duration and the amount of the monthly payments are recalculated according to the applicant’s financial possibilities. Only one monthly payment is taken each month, because all outstanding debts are now grouped within the same loan. What’s more, the purchase of credit can also be an opportunity to apply for additional funding to realize a new project.
Simply put, buying a loan is like renegotiating one’s mortgage at a better rate, but also including other outstanding loans (such as a consumer credit for example) to get a simplified refund. and more advantageous.
To make a loan redemption, a request for a file study must be sent to an organization that performs this type of operation. It should mention current loans and other debts, and provide evidence of its financial situation. The organization then makes a proposal that needs to be studied and then accepted or rejected. It is often interesting to make several redemption requests to compare different proposals. Once one of them accepted, it is the professional in repurchase of credit which will take care of all the steps.
The opportunity to review his insurance-borrower
When you start negotiating, take a look at your creditor insurance to see if you can get a better deal. Indeed, it is possible to renegotiate the borrower’s insurance each year on its anniversary date and also for each new credit or repurchase of credit. Thus, a renegotiation of mortgage loans is also an opportunity to renegotiate its insurance and realize between 30% and 50% savings on the tariff of the latter. Be careful however, the new insurance contract must offer the same guarantees as the old one and its price will be influenced by the age and state of health of the applicant.
Back to school, the perfect time to start!
If you are planning to start renegotiating your mortgage, back is the perfect time! “We are in the summer period and the banks have few people in the back office, they deal first and foremost with the new files, those that lead to a purchase,” explained recently Mael Bernier in Paris. Moreover, the end of the year is approaching and if your bank has not achieved its objectives for the year it will prefer to negotiate rather than see you leave. “On average, in the first half of 2016, the files we renegotiated saved € 29,500,” explained Maël Bernier. Knowing that rates have dropped even more since then, there is no reason not to try one’s luck!