A rise in variable rates is leading to high monthly payments and you need to do something about it. Have you ever considered changing your terms by renegotiating your loan?
What is loan renegotiation?
The renegotiation of a loan consists in revising the terms and conditions of reimbursement of its credit. The aim of this approach is to obtain new loan conditions. The bank may offer you to :
- Reduce the amount of your monthly payments by extending the term of your loan
- Convert your variable rate to a fixed rate (as is the case with atHome Finance)
Let's illustrate this last point with an example:
A couple obtains a loan for a primary residence from 500,000 euros with a variable rate on 20 years. Their monthly payment is 3 083 euros.
However, following an increase in variable rates, the couple wishes to convert your variable rate to a fixed rate with the help of a broker atHome Finance. With a fixed rate and a longer loan term, the new monthly payment will be 2463.89 euros on 30 years. Or 520 less to pay each month.
Then, as soon as interest rates fall, the couple will be able to renegotiate on better terms and reduce the term of the loan to bring down the overall cost of the loan.
How to prepare for renegotiating your loan?
👉 Take the time to build a strong case
To facilitate acceptance of this renegotiation, it is essential to present a good record. Indeed, many criteria will be analysed: your household income, your debt ratio (possibly linked to other existing loans), etc.
👉 Compare offers
A loan commits you for several years and represents substantial amounts, so it is essential to make competition to find the best offer. Approach several banks or a broker atHome Finance to find the best rate.
Some things to know before you sign!
The advantage of loan renegotiation is reduce costs of his loan without having to change banks.
👉 You will have to pay an application fee and an early repayment penalty. So before you sign, be sure to bring a calculator!
👉 The bank has every right to refuse your application. This is because you have committed yourself to the terms of your contract. This will depend on your financial situation or the reason for your application (change of family situation, loss of employment, etc.).
If your renegotiation fails...
If your request for renegotiation has been refused, it is possible to request a credit repurchase. In this case, a other bank can buy back your current loan and offer you a new credit with terms that suit you better.
It is important to take into consideration the costs associated with this repurchase (new file fees, mortgage fees, etc.). It is therefore important to be certain that this new offer is much more interesting for you than the current contract.
Are you looking to renegotiate your loan or buy it back? The brokers atAtHome Finance are there to help you find the right loan terms for you!
Written by
atHome
Posted on
01 March 2023