When do you have to renegotiate a mortgage?
The borrower does not think about renegotiating his loan when he receives the requested funding. This seems obvious, the borrower is in the payment phase. But over time when he finds that the credit rate has dropped significantly, and he has a few years left to pay all of his loans. So He is tempted by the re-negotiation of his credit. However, renegotiating a loan is advantageous for the debtor only if it does so at the right time.
Here are 5 best conditions to renegotiate a loan:
The difference between the old and the new rate is at least 1 point
This is the only condition so that the sum gained by a reduced rate can be higher than the expense paid after renegotiation especially with the fees, the penalty, etc.
The remaining term must be at least ten years
The longer the remaining credit period, the lower the interest payable. But in the context of credit, the capital to be repaid remains the same, it is only the interest to pay that benefits from the rate variation.
The depreciable loan is at the beginning of its repayment
The monthly repayment of a depreciable loan is fixed but the share dedicated to the repayment of capital increases over the years while the share reserved for the reimbursement of interest decreases from year to year. This means that to be profitable, renegotiation of a depreciable loan must occur in the first 1/3 of its repayment. Example: in the first 5 years for a loan of 15 years).
The mortgage is a loan in fine
The loan in fine is to pay a monthly payment consisting solely of interest and to pay savings to repay the capital at the end of the loan. The larger the credit, the greater the value of the interest. So, consider revising by loan buyback will be advantageous.
The bank will not charge too much foregone
Negotiation is a win-win agreement. The refusal of the bank is motivated by the shortfall that affects it during a renegotiation. As far as we are concerned, the best way is to renegotiate a loan. Especially with a rate that has advantages for the borrower but also acceptable for the bank. Now if there is a change of bank, it’s not the same thing.
Precision: we are talking here about the right moment to revise a mortgage. So you have to make money with a lower interest rate. The borrower today, has several opportunities to renegotiate a loan in other conditions such as to lower the level of monthly payments.