Renegotiating your home loan involves paying off an existing loan and replacing it with a new one at a more favorable rate.
Why set in motion a mortgage repurchase ? This is a win-win operation for both the borrower and the institution that granted the initial loan.
Indeed, when the first pays less interest in the long term, the second will find an excellent way to attract and retain a new customer. And for the starting bank, it is not a question of too sharp a loss either, since it will recover early repayment costs which will partly cover its shortfall. Here’s what to have in mind before resorting to it.
Costs related to the repurchase of credit
Do not be blinded by a lower interest rate than the one that was in effect when you took out the initial mortgage. Indeed, if a bank dangles a lower rate, be careful that it does not hide fees and other penalties that would turn your feeling of savings into a nightmare.
Prepayment indemnities (IRA)
These IRAs are in the majority of cases the heaviest burden on the borrower. Thus, the bank signing the first loan does not derive any profit from the negotiation with a client who will leave whatever happens. The penalties, it will therefore request them in full (3% of the outstanding capital). For example, the repurchase of a credit of 4% with the outstanding capital of 100,000 euros will generate IRAs of 2,000 euros. Only the presence of a particular clause negotiated at the origin of the credit can allow you to escape it, but in this case, consider yourself very lucky because it is rare.
Guarantee costs
New guarantee fees are naturally the result of the death of the original loan and the birth of the new credit. This will then be a release fee (if it is a mortgage or a Denier Lenders Privilege Listing) or a new surety (if a guarantee fund is to be used).
Here, the potential reimbursement of the previous deposit may partially offset these costs. File and notary fees may also be taken into account.
How to redeem?
The mortgage repurchase transaction is easy to perform. It suffices to give the potential credit institution which will take over this information: the remaining term, the amount, the outstanding capital, the possible new contribution. A broker can help you initiate the transaction, if you wish.
When to launch it?
For the mortgage repurchase to be beneficial for you, the gain on the total cost of the credit (cost of the current credit minus the cost of the new credit) must be able to cover:
- early repayment penalties, (6 months interest with a maximum of 3% of the outstanding capital, as we have seen previously;
- the costs of establishing the new guarantee if it is to be applied);
- the amount of capital outstanding, that is to say at least 50,000 euros, and if possible greater than 70,000 euros.
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