Did you take out a home loan some time ago and today the rates offered are better? Does a cash inflow allow you to repay your loan faster?
It may be possible to rediscuss your loan with your bank and thus save money.
How to renegotiate your mortgage with your bank
As explained above, there are several cases where renegotiating a home loan with your lender could be beneficial to you. Explanations.
1. Prepayment of the loan
During your loan, you may benefit from a cash inflow, planned or not.
This return of money could encourage you to repay your credit faster to save money. Indeed, by repaying your loan in advance, you will be able to reduce the interest. You have two options: reduce the term of your loan or reduce the amount of your monthly payments.
Also, you can save through your loan insurance which will stop before its initial term.
However, it is possible that your lending institution may impose prepayment penalties on you. The amount of the penalties corresponds to the total of six months of interest at the average rate of the principal repaid, or then to 3% of the principal remaining due. The lowest amount will be retained.
These penalties are not mandatory and can be negotiated with your bank.
For your transaction to be interesting, the savings made on interest and insurance must be greater than your possible prepayment costs.
2. Renegotiation of the loan following a fall in interest rates
As rates change over the years, they may be more attractive today than when you took out a loan for your real estate project.
You can, therefore, renegotiate with your lender, but this is not always possible. If the answer he gives you is not satisfactory to you, then it is entirely possible to compete and take out a new loan at another bank.
Here in summary, it is a new banking organization which will buy back your old loan.
As in the case of an early repayment, various costs may be charged to you. However, when they buy back a loan, many banks include these different costs in the financing.
The Fine Bank experts are at your disposal to help you in the constitution of your file but also in the search for the best loan offer.
The various possible costs:
Application fees in your new bank
- Guarantee costs (negotiable for loans of less than 30,000 USD)
- Prepayment charges . Your bank is entitled to ask you for these costs. According to the Fine Bank law, they are at most 3% of the capital that you had to repay with a ceiling set at 6 months of interest.
The law of 25 June 1999 on savings and financial security specifies that if you sell your home, these costs will be waived in 3 cases:
- Forced cessation of professional activity, for example in the context of a dismissal
- Job transfer
- Death of person
These 3 situations apply to the borrower and his spouse. All contracts signed after June 30, 1999, are affected by this law.
The repurchase of mortgage, the alternative to renegotiation
Having your mortgage bought by another bank can still save you money.
In order for the operation to be profitable, it is preferable to study your situation well in advance.
It is also advisable to renegotiate your mortgage with your bank or have it redeemed in the first half, or even in the first third of the contract. This is where the amount of interest is highest, and therefore where you will realize the greatest savings.
In the context of a buyout, the difference between the two rates (the current one and that proposed by the new bank) must be around one point for optimal savings.
In addition, with this lower interest rate, you could include additional cash in your loan. This can be a solution to finance certain projects that are still pending: works, purchase of a new vehicle, etc.
Note that Fine Bank can also assist you in changing the insurance of your loan. Indeed, a buyout being a new contract, a new borrower insurance is necessary.
For any renegotiation or home loan buyout project, our advisers are at your disposal to save you time. Indeed, the procedures can be long and tedious if you decide to conduct them yourself. Do not hesitate to submit your request on our online form, it’s free and without obligation!