Do you need a mortgage? Do you want to negotiate the loan? Discover our tips for negotiating your mortgage!
It is possible, and even more advisable than ever, to negotiate your mortgage in order to obtain the best conditions. Let’s not forget: the borrower is a customer like any other, and the lender is in a competitive situation. Here are the possible room for maneuver.
Admittedly, the conditions for granting real estate loans have become more flexible. Since January 1, 2021, the maximum term of a loan in new buildings has increased from 25 to 27 years, the maximum debt ratio from 33 to 35% and the volume of exemptions from these rules from 15 to 20%. But, at the same time, banks have granted fewer loans due to the uncertainty associated with the health crisis: while rates have continued to fall, the number of loans has fallen. This is not a reason not to negotiate your credit and obtain the best possible conditions, the economic situation requires …
Avenues for negotiating
The first lever to lower the cost of your mortgage: to play competition. It is imperative to consult several banks. Putting forward the written proposals of competitors helps to give weight to the negotiation. From there to be satisfied with the advances obtained during the first round of establishments, it would be a mistake. Do not hesitate to do a second round to always get better …
It is also possible to use a mortgage broker who will carry out these negotiations for you. This will allow you to save time, and above all to have the talent of a real professional to negotiate.
It remains to be seen what is negotiable …
Reduce the interest rate
Central element of the mortgage, in addition to the amount of the loan, the interest rate is THE criterion to be negotiated. As has been said, rates continued to fall during the health crisis, posting an average of 1.23% in the 3rd quarter of 2020, against 1.24% in the 2nd quarter. Nevertheless: the more you will succeed in “scavenging” a few tenths or hundredths of points, the more the total cost of your mortgage will be reduced.
Optimize the duration of the loan
In trend, the possible duration of a mortgage has continued to increase for several decades. A phenomenon which mainly benefits the bank. Indeed, extending the duration of a mortgage increases its cost. Also, it is preferable to borrow over a shorter period by optimizing your personal contribution and by playing on the monthly payments.
Lower the borrower insurance premium
Up to more than 30% of the total cost of the loan, theloan insurance is a major expense linked to mortgage loans. It is therefore a savings lever. Especially since paying less for your insurance does not mean being less well insured! In this regard, be aware that an insurance contract external to the lender cannot be refused by the bank if the guarantees are of a level equivalent to that of its group insurance.
Eliminate early repayment indemnities
Too often forgotten, the Early Redemption Compensation (IRA) must also be the subject of negotiation, and this time to be purely and simply deleted. These allowances, which allow the banker to demand fees in the event of early repayment of the loan (fees up to 3% of the outstanding capital and capped at 6 months interest), can quickly turn out to be costly.
Calculate the total cost with administration fees
Finally it is absolutely necessary to see the application fees. Strong competition forces bankers and brokers alike to work without charging you administration fees. On the other hand, if it turns out that you have to do it, be vigilant. In fact, for a loan of € 100,000 at 4% over 20 years, € 1,000 in administration fees represent an increase in the rate of 0.08%. Also, if another bank offers at the same time a credit at 4.05% without administration fees, it becomes more interesting to choose the loan with the higher rate.
It will no doubt be difficult to win the case on all these points. Arbitrate. But one must remain adamant about the interest rate and the choice of loan insurance.
This content was produced in partnership with Eskimoz. The editorial staff of BFMTV did not participate in the production of this content.
—
