A significant drop in mortgage rates is a real opportunity for buyers – whether for a purchase or for the renegotiation of their loan from their bank.
Why renegotiate your home loan?
Since the start of 2016, the observed drop in interest rates has stabilized around 0.8%, on average. A rate conducive to renegotiation, or even the redemption of its credits to allow:
- Reducing the amount of his monthly payments
- Reducing its repayment period
Note the distinction between renegotiating your mortgage and having it redeemed: the first case involves the payment of application fees, while the second also involves that of early repayment indemnities and costs relating to the new guarantee, made in another bank.
Current interest rates are such that loans taken out in recent years, or even at the start of 2016, can already be the subject of an attractive renegotiation. For example, a loan of USD 200,000 taken out in August 2015, with an APR of 2.7% over 20 years, now renegotiated, can allow a net saving of more than USD 18,000, on the basis for a credit buyout at 1.65% today.
What conditions must be met?
Between the prepayment penalties, the guarantee costs of the new loan and the possible administrative costs, it is imperative to meet a certain number of conditions, in order to be able to review your property loan:
- Do not sell your property quickly after the repurchase of the loan, to have time to amortize the early repayment costs, the equivalent of 6 months of interest capped at 3% of the principal owed. As the simulator on the site clearly demonstrates.
- Count at least 1 point of difference between the original APR (Annual Effective Annual Rate) and the current rate.
- Have at least USD 50,000 or even USD 70,000 for certain experts of outstanding capital.
- Have a repayment duration greater than the elapsed duration, to amortize the loan repurchase costs.
If you meet all of these conditions, renegotiating your credit could be relevant. The idea is to properly recalculate the estimated gains, by integrating the various inexpressible costs linked to this approach.
Why hire a broker to renegotiate your loan?
At present, the people manage to obtain an average TEG (overall effective tx) of 1.2% over 10 years, up to less than 2% over 25 years. But, with the help of brokers, it is possible to obtain even more attractive rates on certain key profiles: up to 0.8% over 10 years or just over 1% over 20 years. An approach all the more interesting, when the broker is free.
So, if your first step is to contact your banker, to find out about the conditions for adjusting your loan, it may be worthwhile to take advantage of the competition, by appointing a broker, to carry out this challenge at best. Indeed, these professionals know this universe perfectly, skillfully playing on the commercial policy of each bank, to be able to get you the lowest rate.