The purpose of real estate renegotiation is to buy a home loan at a lower rate to save on financing. The borrower will have to take into account the costs generated by this transaction and the expected gains in determining whether it is appropriate to realize it.
Real estate renegotiation gains
The borrower benefits from lower borrowing rates. Depending on the date of subscription of your credit and the rates in effect at the time of the loan redemption, there can often be a difference of 2.00% or more. The repurchase of credit is generally interesting from 1% of difference.
Here is a table showing the impact of rates on the cost of financing and its monthly payments.
|Amount of credit||200,000 €|
|duration||240 months (20 years)|
|Monthly||$ 1,320||$ 1,212||$ 1,109|
|Total cost||$ 116,779||$ 90,871||$ 66,207|
This illustrative example puts forward a credit of the same amount and duration, only the rate varies. A decrease of 1% represents a difference of almost 26,000 € of the total cost. For a decrease of 2%, a difference of more than 50 000 €.
It can also benefit from new insurance contracts cheaper than the previous ones.
To calculate the potential gains from a loan renegotiation, you must take into account the outstanding capital, the rate difference, the costs incurred by the transaction and the remaining repayment period.
Repayment options for a real estate renegotiation
Make a buyback for the same duration
The purpose of this operation will reduce the amount of the monthly payment.
Make a renegotiation of mortgage loan by keeping a monthly payment roughly equal to the old credit
In this case the duration is revised downward. It is through this operation that the borrower achieves the greatest savings and can claim even lower rates as the duration decreases.
Real estate loan redemption fees
Real estate renegotiation entails new fees that must be taken into account in determining whether the transaction is profitable for the borrower. So to know the new amount of the mortgage the borrower will have to take the remaining capital to which he will add the following fees.
Most loan agreements provide for penalties in the event of early repayment of principal. These penalties are calculated from the amount still to be reimbursed and may be different depending on the loan offers, but they will be limited by law to a total of 6 months of interest within the limit of 3% of the outstanding capital.
Taking a new guarantee
In some cases, a new loan guarantee will be put in place.
Subscription of a new borrower insurance contract
The borrower will have to take out a new borrower insurance contract to cover his new home loan. It can also save money on the cost of insurance.