Taking advantage of historically low mortgage rates today is a legitimate approach that you would be wrong to deprive yourself of! It may indeed be interesting to shorten the duration of your home loan thanks to the savings made on the cost of credit, or to extend it on the contrary to reduce your maturities provided that the rate of the loan initially taken out is higher than 3.5%.
The repurchase of mortgage (or the renegotiation of credit if you stay in the same bank) will also be advantageous if the initial capital is high (250,000 $ for example) and if the loan in progress is in the first third of repayment of a long term (20 or 25 years). So how do you convince the bank to accept conditions that will be less profitable for them?
1. Compare with the amount of the cost of credit
The exact amount of the cost of credit is the basis of the discussion. Using the amortization table of the initial loan, the amount of interest must be added up to the end of the contract. The cost of credit will be the element of comparison with the new one.
2. Negotiate the amount of capital to borrow
The calculation of the new capital to borrow is the basis of the discussion. It includes the amount to be reimbursed appearing in the remaining capital column, the reimbursement costs and the new guarantee.
- Calculation of early repayment costs: multiply the remaining capital due by 3% or add 6 months of interest. The most favorable sum will be applied. For example: 240,000 X 3 = $ 7,200
- Calculation of the new guarantee to be negotiated: the guarantee costs vary according to the amount of the credit. To obtain a secure approximation, the following operation must be carried out: principal remaining due + prepayment charges X 0.8%. For example: 240,000 + 7200 X 0.8 = $ 1977.60.
- Amount of the new loan before negotiating the guarantee: it is the sum of the capital borrowed, the costs of early repayment and guarantee. Example: 240,000 + 7,200 + 1977.60 = 249,177.60 $.
3. Gather comparative studies
It is a good idea to bring home mortgage simulations from competitors on the day of the meeting, to suggest that you are ready to leave your bank in the event of a refusal. If accepted, it will be possible to compare the offer with the projections of other lending organizations or a broker. Note that the difference between the initial credit rate and that renegotiated must be at least between 0.8% and 1%.
4. Simulate a new project
Ask for more details about a new loan for a real estate project. From the proposed quote, compare the amount of interest. Then accept the offer as part of an ongoing credit renegotiation.
In case of refusal, highlight your good customer profile:
- Financial products subscribed;
- The absence of default in payment;
- The amount of savings acquired.
It can then be interesting to subscribe to a new financial product as a pledge of your loyalty.