If you borrowed a few years ago, if only at a fixed rate of 4%, you can get less than 3% today. The difference allows you a great saving which you can use to reduce your monthly payments or shorten the duration of repayments even more. But how to do it ? Are you going to negotiate by yourself or entrust this task to a broker ? Here are some answers.
Direct renegotiation Vs broker
Everything is in the rate. Really ?
The most common error encountered when an individual directly renegotiates his mortgage loan rate with his bank, is to focus on the word “rate”. First of all, the rates that we display are the nominal rates, they do not represent the cost of credit.
Compare loan costs
To illustrate the importance of taking into account the cost of credit, let us take 2 cases, on a repurchase of mortgage of 150,000 $, to be repaid over 12 years.
- The first offer includes an insurance rate of 0.5%, administration fees of $ 1,000, and a nominal rate of 2.8%.
- The second offer includes an insurance rate of 0.3%, administration fees of $ 200, and a nominal rate of 3%.
Which of these two offers is the cheapest ? Answer: the second.
Of course, the amount of the nominal rate plays a key role in the success of a loan repurchase. However, brokers benefit from preferential rates. Why ? Because they are good customers for banks: almost 30% of the real estate turnover of banks and credit companies comes from brokerage. Brokers are good clients for banks, so the latter grant them preferential rates.
Thus, a loan repurchase broker will in any case obtain a lower nominal rate than an individual renegotiating his rate directly with his banker.
The advantage of banks: time
Building a credit renegotiation takes time. This time, the individual does not always have it. In particular, he does not have the time to approach several banking establishments to offer them his clientele. He therefore tends to accept the first good offer that his banker will make to him.
Yes, an individual with a sense of contact will manage to renegotiate his mortgage rate at a discount. This right is also given to it by the Consumer Code. The question is whether he could not have gotten even better, from his bank or elsewhere?
The credit repurchase broker has nothing to do with his days. It collects supporting documents, files them and transmits them to its financial partners. His client does not have to canvass the banks, he can go about his daily business while the broker works for him.
Tips for renegotiating your credit
Consult current property rates
Vousfinancer.com provides you with the table of current real estate rates that brokers are able to obtain. Consult these rate grids taking into account the remaining repayment period.
Because in a repurchase of credit, you will in fact take out a new mortgage, for a shorter duration. Indeed, if you had taken out your mortgage over 20 years 10 years ago, today you only have 10 years of repayment.
A 10-year loan is cheaper than a 20-year loan. You will therefore look for rates over 10 years.
Use the levers of negotiation
Each rate renegotiation is a special case. However, we always find the same parameters in the discussion: borrower insurance, application fees and prepayment penalties.
If you have a good day, your bank branch will prefer to receive fresh money in the form of payment of application fees and prepayment indemnities, and will grant you a low rate in exchange.
If your bank is intractable, you will have to go see the competition. You will get good results if you highlight your customer profile.
Put your profile forward
What interests banks today is more the money they will be able to earn with your customers. Insurance products of all kinds, savings media, use of your bank card, here is, among other things, what a bank agency expects from its customers.
If this is exactly what you have done for all these years with your own bank branch, then you have a good profile. A competing bank will be ready to grant you better conditions on the redemption of your mortgage.
But it always comes back to the same question: couldn’t you get even better elsewhere?
Why buy back credit?
To find purchasing power
If a loan repurchase leads to a reduction of $ 100 on monthly payments, this represents $ 1,200 in addition to purchasing power per year. These $ 1,200 can be saved, spent, or used to take out a consumer loan.
At this point, the borrower must realize that $ 1,200 per year represents $ 12,000 over 10 years. There are no small savings, especially when it comes to taking advantage of the current low rates.
However the economy can be more or less important, it all depends on the difference between the overall effective rate (TEG) before and that after.
A word about reducing your monthly payments
The objective of the credit repurchase is to lead to a reduction in monthly payments. Please note, it is also possible to reduce your monthly payments even further by extending the duration of reimbursements.
Consider these two different operations:
- Credit repurchase: the property debt is taken up, to repay it over the same remaining term. Consequence: the monthly payments decrease, the cost of credit is decreasing.
- Debt restructuring: the property debt is taken over to repay it over an extended period. Consequence: the monthly payments drop drastically but the cost of credit increases.
A credit buyout to pay off faster
Some households take advantage of the loan buy-back to pay off their home loans faster. This is particularly the case for couples arriving about ten years from retirement, for whom there is between 10 years and 15 years to repay.
The repurchase of credit will not allow them to reduce the monthly payments, but to finish the repayments just before their retirement.