Posted on December 24, 2019
In April, mortgage rates hit a new all-time low, offering borrowers new opportunities to lower their mortgage rates. Almost all loans taken out before mid-2016 can potentially be renegotiated with significant savings! Good Finance, a network of 200 real estate brokerage agencies, calculated the possible gains for a loan of $ 200,000 over 20 years according to the seniority and rate of the loan and drew up the list of advice to optimize its renegotiation.
Rates dropped to their lowest historical level!
In April as in March, mortgage rates fell slightly further, reaching on average 1.30% over 15 years, 1.50% over 20 years and 1.70% over 25 years “But we manage to negotiate for the best profiles 0.6% over 15 years, 0.85% over 20 years and 1.1% over 25 years. And even recently, we got 0.30% over 7 years for a loan renegotiation! » Specifies Jérôme Robin, managing director and founder of Good Finance.
Resumption of renegotiation requests since February
Since the beginning of February, Good Finance has noticed a resumption of requests for credit renegotiations, the number of which had decreased in the second half of 2018. In the first quarter, loan renegotiation files were up 25% compared to the 1st quarter of 2018. The same is true for Banque de France’s monthly statistics: in February, credit renegotiations represented 18.3% of new loans, compared to 14.6% in December 2018, but 60% in February 2017!
We are therefore far from the massive waves of renegotiation in 2010, 2013 or 2017, but there are still requests. “If most of the credits that could be renegotiated have already been renegotiated in recent years, sometimes even several times, the The announcement of record rates offers new opportunities for borrowers who have taken out a loan – even recently – to renegotiate it.
This also motivates those who have been considering doing it for several months without having the courage to embark on this operation which can discourage those who flee from complex procedures! Analyzes Allex Bouler, spokesperson for Good Finance.
Wrongly, because this operation can turn out to be particularly interesting financially by generating monthly savings for those concerned. It is also the means for those who would like to make a second purchase (rental or second home) to free up an additional monthly repayment capacity and therefore to buy without increasing their monthly payments too much!
“We consider that there must be a point of difference between the rate of the credit to be renegotiated and the current rates for the economy generated to make the operation attractive given the costs involved which can reach up to 3% of the remaining capital due. But a difference of 0.70 point may be enough for recent loans, of more than $ 300,000 or with durations greater than 20 years, hence the need to study the relevance of the operation in order not to pass next to an opportunity, ” explains Allex Bouler.
Who are the serial renegociator?
Indeed, for credits of less than 5 years, the operation is even more interesting because it is at the start of the loan that the most interest is reimbursed (up to 50% of the monthly payment the first two years for credits over 20 years and even up to 60% for credits over 25 years). So this is when a buyout will have the most impact on the total cost of credit.
“We even have the ‘serial renégociator’ who renegotiate their loans every 2 years, and are in the 2 nd or 3 rd operation! but beware, the banks manage to spot them and they are less inclined to capture this clientele deemed too volatile! In addition, by renegotiating every 2 years, the costs generated by the operation do not have time to be amortized and the credit is reimbursed less quickly, because we start each time at the start of the loan, when we repay the most interest, even if they are lower!
Substantial savings: 129 USD per month, or 22,822 USD in total!
An example ? For a loan of $ 200,000 taken out over 20 years in January 2014 at 3.35% excluding insurance and renegotiated today at 1.10% over 15 years, this saves $ 129 in monthly payments, making a total of $ 22,822 compared to at the cost of the initial credit, all fees included (prepayment penalties, warranty fees and brokerage fees).
How to optimize your loan renegotiation?
First of all, put banks in competition because even very low, rates vary greatly from one bank to another depending on the profiles.
Then, prepare your file well because the bank will ask for the last 3 account statements, last 3 pay slips and especially the reimbursement statement in order to know how much you will still owe to your bank, which can sometimes take several months. Anticipate!
Be aware of the costs with prepayment penalties that will have to be paid to the old bank (3% of the outstanding capital capped at 6 months of interest), application fees and guarantee costs for the new loan (between 1.2 and 2% of the amount borrowed). These costs can, under certain conditions, be reintegrated into the new loan.
Make the choice if possible to decrease the remaining term of your loan by keeping the same monthly payment because the savings generated will be greater thanks to a lower rate over a shorter duration and faster amortization of the credit.
Take this opportunity to find a better adapted and / or more competitive loan insurance and thus maximize the savings generated by the renegotiation operation.
Plan to keep your property – and therefore your credit – another 2 years minimum because during a repurchase, you start at the start of the loan with, therefore, slower amortization in the first years.