Home mortgage rates have continued to fall, slowly but surely, since the start of 2016. And if they have experienced some stability this summer, they nevertheless remain at floor levels rarely seen until then. What encourage candidates to acquire to realize their projects, but not only: if you have a loan in progress, it is more than advantageous to renegotiate with your credit organization … or buy your loan to go elsewhere !
Increasingly attractive borrowing rates
Started in 2015, the gradual drop in mortgage rates largely explains the good health of the sector over the past year, with a return to the first-time buyers market (+ 38% in one year according to this article), also encouraged by strengthening government systems and by prices which have fallen slightly.
If it surprises analysts, the constancy of the rate cut allows all the seers of the real estate market to go green. It is certainly interesting to finalize an acquisition project when the average fixed rate over 20 years has risen to 1.75%! In details :
- The average fixed rate at 10 years is 1.30%
- The average fixed rate at 15 years is 1.55%
- The average fixed rate at 20 years is 1.75%
- The average fixed rate at 25 years is 2%
And these numbers are just averages. According to the Vousfinancer barometer, since the end of June, an excellent record can hope to obtain a fixed rate over 10 years at less than 1% (0.9% exactly), over 15 years at 1.2%, over 20 years at 1.35 %, and over 25 years at 1.7%!
Depending on the type of accommodation, the average rates are (all durations combined):
- 1.59% on the former;
- 1.62% on the new.
If these attractive rates allow buyers to realize real estate purchase projects, whether it is to acquire property, afford a long-awaited second home, or to embark on a rental investment, not only acquisition candidates are able to benefit from it. For those who have already contracted a loan, this is the opportunity to go through the renegotiation box: there are great savings to be made!
Renegotiating your mortgage: an opportunity to seize
Have you thought about renegotiating your home loan? With rates halved in recent years, it is in your best interest to reduce the cost of your credit. If you borrowed at 3.3% (effective average rate in 2014) a sum of 200,000 USD, your credit will cost you, in the end, nearly 88,000 USD (including insurance); Today, with an excellent file allowing you to benefit from a rate at 1.35%, the same loan would only cost you more than 43,000 USD (insurance included)! A saving of 45,000 USD.
This applies to borrowers from previous years as well as the most recent. Indeed, the fall in interest rates was so strong and rapid that the loans contracted between the end of 2015 and the beginning of 2016 have every reason to be renegotiated! If we keep the example of 200,000 USD, the difference between the rates for January 2016 over 20 years (2.4% on average) and the current rates over the same loan period, makes it possible to earn around 15,000 USD, after payment of the prepayment penalties and the costs of the new guarantee!
Tips to renegotiate your credit with your bank
The rates are advantageous; you are ready to renegotiate to get a nice gain on your credit; all you have to do is start discussions with your bank. And there, as much to say that the difficulties begin. Because the renegotiation of the mortgage is not exactly a priority for banking establishments – and especially not in the middle of summer, when part of the staff is lacking. Banks are not required to accept renegotiation; they can refuse a discussion outright without giving an explanation.
The operation is tried, however, and it will work all the better if your relationship of trust with your banker is good, and your profile is excellent (understand: you are solvent, never in the red, ant rather than cicada, and you have some potential – in the sense that you are likely to buy other banking products). In other words, it is the best profiles who are most likely to succeed in renegotiating a bank mortgage (see on this subject a previous post).
It is up to you to show your most beautiful financial face to your banker, with account statements and a list of products acquired from this same establishment; and if the discussion gets bogged down, it’s always good to have some precise calculations close at hand to demonstrate that you will have everything to gain by going to take out a new loan from a competitor – while threatening, in the process, leave with your accounts and your savings. This will put your banker in a position to wonder if he can afford to lose a good customer.
Note that in the event of renegotiation with the bank, it may be good to wait: the rates have probably not stopped falling. In addition, as of the next school year, banks will start to launch more aggressive offers – with rates that should continue to fall, therefore – to attract new borrowers before closing their balance sheets at the end of the year.
In the absence of any positive prospect on the side of the bank, there remains a solution: the repurchase of credit.
Tips for buying back credit
When the bank refuses to renegotiate a mortgage, it is always possible to turn to another lending institution. The credit repurchase operation consists, as its name suggests, in buying back the remaining amount (that which has not yet been repaid) and in taking out a new mortgage loan from a competitor, so as to benefit from the lowest rates. more attractive. But beware: this procedure has a cost and is only advantageous in certain cases, which is why it is essential to do your accounts properly!
Changing the loan establishment in fact causes the following expenses:
- Prepayment penalties. They are due when you repay all or part of your credit to the lending institution in advance, and can reach 3% of the principal remaining due (within the limit of current interest over 6 months).
- Guarantee costs. Whether it is home loan insurance, a bank guarantee or a mortgage, these costs will have to be paid again.
- Application fee. They are to be negotiated with the new establishment chosen, which can for example offer them as part of a commercial gesture.
For example, for a loan of 400,000 USD subscribed at the rate of 2.4% over 20 years, the costs amount to approximately 12,500 USD (two thirds for the new guarantee, one third for the prepayment penalties).
This is the reason why a repurchase of mortgage is only interesting under certain conditions:
- When the difference between the initial rate and the new rate is greater than or equal to 1 point;
- When you are still in the first third of your refund;
- For significant amounts, beyond 50,000 USD (which is generally the case with a mortgage).
In any case, when you are looking to take out a new loan at a more advantageous rate, it is recommended to take the advice of a real estate broker: he will guide you through the jungle of offers and negotiate the minimum fees at pay to the new lending institution.