At this time, interest rates are at their lowest and if you took out a mortgage a few times ago, it is likely that the rate backed by this loan is higher than those charged today. If you have made an appointment with your banker to renegotiate your mortgage and that it has shown little inclination to make you enjoy a better offer, you still have a solution: The repurchase of credit by a competing bank .
In which case is the repurchase of credit interesting?
The redemption of credit is only worthwhile if it saves you money compared to your initial credit by taking into account the expenses inherent in such an operation.
- Calculate your IRA (Early Redemption Benefit or penalties) = 6 months of interest to be paid at the time of the redemption request (maximum 3% of the outstanding capital).
- Also add the fees that your new bank will ask you for this new loan.
- Take into account the cost of the new guarantee because new credit means new guarantee. Depending on the guarantee backing your current credit, the procedures will be different:
- In the case of a surety, you will recover 75% of the mutual guarantee fund that you paid.
- In the case of a mortgage or IPPD, you will have to pay a show of hands.
Pay attention to certain points
From the rates offered by the banks that you have solicited and fees mentioned above, you will be attentive to the following points:
- Know your outstanding capital and the remaining term of the loan. See the amortization schedule provided by your bank.
- Choose the duration of the new credit: same duration and reduced monthly payments? or shorter duration?
To keep the same duration and lighten its monthly payments:
- If your loan is in the first third of its repayment then your new credit will have to have an interest rate at least one point lower than your old loan. Thus the operation will be interesting given the various financial expenses mentioned above.
- If your loan is in the 2nd third of its repayment then it will be necessary that the new rate is 2 points lower than the old rate for the operation to be profitable.
- If your loan is in the last third of its repayment then the operation will not be interesting. In the case of a depreciable loan, most of the interest is repaid at the beginning of the loan. As a result, the interest portion of the maturities will have fallen sharply and so negotiating a lower interest rate is unlikely to generate financial gain.
If you want a shorter duration:
If you want a shorter duration, the operation will be interesting anyway. Indeed, it is even the option to choose if your income has increased since the subscription of the first loan. By choosing a shorter duration you will have a lower rate and therefore a lower cost of credit. By the way will be indebted on a shorter period.
To conclude, be careful about the total cost of the proposed new credit, in addition to the new monthly payments, calculate all the costs and net financial gains.