With the recent decreases observed in February and March, credit rates are once again close to the records at the end of 2016. In this context, some borrowers are once again asking Lite Lending, a credit brokerage network, to renegotiate their mortgage. Explanations.
Loan renegotiation requests are re-emerging. While this trend had largely run out of steam at the end of 2017, some borrowers are once again asking for Lite Lending Finance, a credit brokerage network, to renegotiate their mortgage. In fact, certain loans taken out in 2015 and 2016 can now and renegotiated with savings to the key, in particular by reducing the duration of the loan to benefit from even lower rates.
A burst of requests linked to the low rate
In March, a dozen banks lowered their lending rates again, leading some borrowers to obtain loans on terms close to historic lows. These rate cuts observed in March led to an increase in requests for loan renegotiations.
“Given the weakening of demand noted at the start of the year, but also due to the easing of government borrowing rates, which fell to 0.72% against almost 1% in mid-February, mortgage rates are particularly attractive. In this context, we recorded an increase in requests for loan renegotiations in March, ”analyzes Alexandra Alima, director of bank relations at Lite Lenders Finance.
In March, 10% of loan requests registered with Lite Lenders Finance are loan renegotiations, while this figure had dropped to 5% in January 2018, while it still reached 15% in January 2017 and more than 25% in September 2016 “However, for the moment , this is more of a start than an upsurge in requests, and we are not at the level that we experienced in 2016 because many operations have already been carried out. … But for some borrowers, there is still an interest in doing so … “she adds.
Recent loans more affected by loan renegotiation
While there have been several waves of renegotiations in recent years and the era of loan renegotiations is over, some borrowers who have taken out loans in recent years may have an interest in exploring this possibility currently available. Indeed, with the recent rate cuts, there is now a difference of 0.70 to 1 point with the rates of loans taken out in 2015 and in the first quarter of 2016, loans which in 2016 and 2017 were too recent to be renegotiated. In 2015, the rates were between 2.30% and 2.60% over 20 years against currently 1.30 to 1.60% over the same period.
Rates close to 1% over 15 years, 1.15% over 20 years and 1.45% over 25 years for the best profiles
For the best profiles, it is even possible today to negotiate rates close to 1% over 15 years, 1.15% over 20 years and 1.45% over 25 years. “There is today for some borrowers who have taken out a loan in recent years a window of fire with real interest to renegotiate, especially since it is at the start of the loan that the monthly payments are made up of a larger share of interest, it is therefore at this point that the effect of the fall in the rate of credit has the most impact on the cost of credit. In this context, the rate spread of 0.70 point may even be sufficient to offset the costs generated by the transaction. In addition, the economy will be even better by reducing the duration of the loan while keeping the same monthly payment, for example by going from a loan over 25 years originally to 20 years today ”advises Alexandra Alima. For example, a loan of $ 300,000 subscribed in January 2016 at 2.60% over 25 years (monthly payment $ 1,360) can currently be renegotiated to 1.3% over 20 years (capital remaining due of $ 281,000, ie a new $ 288,000 loan including costs , IRA + guarantee), the gain is $ 45,500 while keeping the same monthly payment. By keeping the same remaining term of approximately 23 years, with a rate of 1.60%, the decrease in the monthly payment is approximately $ 105 ($ 1,255) and the total gain of $ 28,900.
Lite Lenders Finance’s advice to optimize its loan renegotiation
Prepare your file well because the bank will ask for the last 3 account statements, 3 last pay slips as when taking out a first loan and the statement of repayment of your loan…
Be aware of the costs with prepayment penalties that must be paid to the old bank (6 months of interest capped at 3% of the principal owed), application fees and guarantee costs for the new loan (between 1, 2 and 2% of the amount borrowed). These costs can, under certain conditions, be reintegrated into the new loan.
Make the choice if possible to decrease the remaining term of your loan by keeping the same monthly payment because the savings generated will be greater thanks to a lower rate over a shorter duration and faster amortization of the credit.
Take this opportunity to find a better suited and / or more competitive loan insurance and thus maximize the savings generated by the renegotiation operation.
Plan to keep your property – and therefore your credit – another 2 years minimum because during a repurchase, you start at the start of the loan with, therefore, slower amortization in the first years …