Falling mortgage rates: renegotiation or buyout?

2016 continues to present very attractive mortgage rates, overall durations! With competition from banks, the records observed in June 2015 are about to be broken.

If you took out your loan before 2014, renegotiating it or having it redeemed is all the more beneficial.

Renegotiating a mortgage, an operation less and less sought after


As highlighted in the February 2016 edition of the Fine Bank info on loans to individuals, 31.2% of the real estate loans taken out last February came from a renegotiation. This figure was 54.5% in August 2015. However, this operation can save you up to 20% of the total cost of your loan!

In the short term, renegotiating your credit can sometimes be more economical than buying it back. Also, it is sometimes faster to achieve. However, note that administration fees may apply.

What explains this drop in interest in renegotiation directly with the lending bank? The interest rate that can be obtained from a loan repurchase is surely the answer.

Really take advantage of mortgage rates by redeeming your loan


The redemption of your credit also incurs costs. The early redemption indemnities (IRA), which are often estimated at 3% of the capital remaining due, are an expense to be expected.

But rest assured: they are capped at an amount equal to 6 months of interest and, by renegotiating with your current bank, can be lowered or even abandoned.

The transaction involves other costs, notably related to warranty fees but also brokerage fees, if applicable and depending on the broker.

As part of a mortgage guarantee, these are expenses related to changes made to the characteristics of your mortgage. Finally, be aware that in the case of a guarantee carried by a surety, part of the current bond will be returned to you once your redemption has been made.

But then, why is it worth buying a loan? The savings linked to a better mortgage rate can amount to thousands of dollars. In the long term, a bank’s offer offering you a lower rate can, therefore, compensate for the fees detailed above!

If you have repaid more than half of your loan, having it redeemed generally saves you money on your loan insurance. Conversely, a redemption made during the first half of the repayment plays mainly on the financial weight of the interest.

Home loan buy-back, a tailor-made solution


A change of lender is also an opportunity for you to redefine your financial priorities. If you have the capacity, you can, for example, reduce the duration of your repayment by paying higher monthly payments.

Thus, you reduce the total cost of interest and pay less loan insurance costs. In the event that you wish to take advantage of the operation to benefit from a more flexible budget, you can lower your monthly repayments while maintaining or extending the duration of your loan.

This makes it easier for you to meet other needs while enjoying valued purchasing power.

Finally, be aware that a simulation with a mortgage broker is free and without obligation. It allows the study of your situation by specialists who will be able to advise you and find for you the most advantageous offer with regard to your profile.

Is happiness in the loan?

Times are changing, mentalities too. The time when our parents or grandparents especially did not want to go into debt and resort to bank loans is well and truly over. The evolution of lifestyles having changed behavior, the doors of different types of banking establishments are pushed more easily.


More accessible credit, longer loans

credit loans

Over the past thirty years, bank loan rates have fallen by more than 10% over the long term, the long term having long referred to loans over ten years. Low rates make it more attractive for a potential buyer to borrow than to have to make a large contribution.

At the same time, the term of the loans has increased significantly. In fact, in less than a decade, the majority of the duration of loans has increased from 15 years to 25 years and it is not uncommon to see loan durations reaching 25 or 30 years, which was extremely rare. there is still little.

In other words, the fall in the cost of credit has thus paved the way for a massive extension of repayment terms. The low rates allow the lengthening of the loan duration, which allows the reduction of monthly repayments significantly. These mechanisms have helped to give access to credit to the greatest number.


Other causes of the credit boom

Other causes of the credit boom

Since the Thirty Glorious Years, health has evolved at all levels, the average age and lifespan of the French has increased steadily and dramatically. The longer lifespan reassures financial organizations and a 58-year-old, for example, has much easier access to it than before.

We also note that the arrival of young people on the job market also occurs much later, which pushed the average age of the first acquisition of housing around 34 years. However, the various governments have regularly tried to support the construction industry, which is highly job creator, by granting aid or loans at zero rate, which are becoming cumulative with other incentives for first-time buyers.

The rise in strength of lending organizations, as well as online banking, is also a reason for the ease of access to loans and their democratization.

Rather than breaking an investment and having to bear the costs and taxes that flow from it, it is therefore better to study these different possibilities, in order to return to your apartment or house for the price of rent, while constituting your own patrimony!