Do you hear everywhere that mortgage rates keep falling but are you already a homeowner? Be aware that it may be possible for you to save money by renegotiating your loan. Tips, tricks and figures: Mortgage broker has carried out a study and sheds light on the repurchase of mortgage loans.
Renegotiating or buying back credit: definitions
You often hear the terms renegotiating credit or buying back credit. You should know that these are two different approaches.
” Renegotiate your credit ” means that you have a mortgage and that you negotiate this credit with the bank in which it was contracted, making only an addendum to the initial contract. So when you renegotiate your loan, you don’t change banks. This process involves almost no costs for you, only bank charges will be requested. However, you will have more limited room for maneuver on the rate because you are already a customer of the bank. In fact, the more you negotiate with it, the more it will limit its expected gain on your mortgage.
Conversely, ” buy back your credit ” means changing establishments. You find a better rate in another bank than the one with which you had contracted your loan. The repurchase of credit involves various costs: early repayment indemnities, guarantee costs, bank or brokerage fees. But, the negotiation margins are higher because the banking establishment wishes to gain a new customer therefore it is ready to make more efforts on the rate.
The criteria to take into account
When you want to renegotiate your loan, you have to take into account three criteria that determine whether you can renegotiate your loan:
- First, you need to look at your outstanding capital, that is, the amount borrowed that you still have to repay at the bank. To renegotiate your mortgage, the remaining capital must be greater than $ 70,000; below this amount, it will be difficult for you to renegotiate your credit.
- Then, you have to look at the residual term of your mortgage. For it, the repayment tenure must be divided by three. If you are in the first third or even at the very beginning of the second third of the remaining term, you can renegotiate.
- Finally, the third criterion to look at is the borrowing rate. The difference between the initial and the current credit rate must be at least between 0.8% and 1%.
These three criteria are not fixed, however, and they can be adjusted according to the duration of your loan or the amount borrowed.
The objectives sought during a loan renegotiation
When you renegotiate your mortgage, you can choose to reduce the duration of your loan or decrease the monthly payment, or both.
According to our latest study, if you choose the option “lower duration”, know that you will get a financial gain of around 30% additional compared to a lower monthly payment.
Despite this, borrowers more often choose to lower their monthly payments. Since January 1, 2016, 46% of borrowers opt for the lower monthly payment. The reason? Lowering your monthly payment means freeing up purchasing power instantly to carry out new projects.
Do you have a mortgage? Do not hesitate to make a credit buy-back simulation, a mortgage loan buy-back simulation (more specifically real estate) or even a mortgage loan simulation for the whole of your project.