Renegotiate your home loan – Steps & Advice
The real estate rate barometer has never been lower. If you took out a home loan a few years ago, renegotiating a home loan may well save you money on your original loan.
This very favorable context allows you to renegotiate your loan conditions with your current banking establishment or the repurchase of mortgage by carrying out a change of bank .
Why renegotiate my mortgage?
Renegotiating a home loan is a timely decision for the borrower. Credit rates have never been lower and competition is raging between banking institutions.
This operation is interesting if you have for example taken out a loan over 20 years and you are in the first 6 years of repayment. Indeed, during this period, you mainly repay the interest paid to the detriment of the capital.
However, it is the loan rate to which you are subject that can grant you renegotiation. The difference between the old and the new real estate rate must be between 0.7% and 1% to be really valid. The amount borrowed for the acquisition of the property must be at least 75,000 dollars. In general, credit institutions refuse applications for which the amount to be financed is lower.
The advantage of renegotiating a home loan is less obvious for those who contracted it after the second half of 2016. Indeed, the difference between the old borrowing rate and the new one is quite small. In addition, certain complexities of mounting the file can dissuade borrowers for such small amounts to be won. On the other hand, for real estate loans which date from the beginning of 2016 or before the approach is very profitable due to the consequent drop in interest rates and savings made.
What is the difference between renegotiating a home loan and buying back credit?
Renegotiating a home loan is often confused with buying credit. Even if these two operations allow you to save money, it is however necessary to distinguish them:
- Renegotiating a loan involves asking your current bank to revalue the interest rate applied.
- Credit repurchase refers to the fact of having recourse to another bank. Please note that during this process, the borrower will have to pay early repayment indemnities, guarantee costs and administrative costs.
renegotiate a bank loan?” />
The first step is to call on a credit broker who will guide you step by step during your credit renegotiation process. He establishes with certainty whether the project is profitable and whether it deserves to be completed or not thanks to his experience on the real estate market.
The second step is to build your loan application package. It can be sent to your usual credit institution or to a new bank. Your objectives can be multiple, such as reducing the term of the loan or your monthly payments. It is according to these objectives that the real estate broker selects for you the most advantageous establishments so that you can benefit from an offer adapted to your personal situation.
In the third step, you give your agreement in principle for the submission of your file to the credit institution of your choice. The credit broker transmits it to the bank which in turn will validate or not the subscription. The approval of the new loan is subject to a study which establishes in particular your debt ratio. The lending institution calculates the possible interest rates based on the current rate. The remaining term and total credit are also included in this analysis.
You can draw a depreciation table to have a clear vision of the situation to come. Once the subscription has been validated, the loan offers are sent to you by post. This fourth and last step ends when you return them signed 11 days after receiving them, this is the legal deadline.