With the recent rate cuts, there are new opportunities to renegotiate your credit, generally for all those who took out a loan before mid-2016, and / or at more than 2% … Tips for saving money on your loan credit and simulations to assess the potential gains depending on whether you choose to reduce your monthly payment, reduce the duration or on the contrary extend it!
The year 2020 was a year marked by a strong movement of credit renegotiations. According to the Banque de France, buyback and renegotiation flows amounted to 59.6 billion euros in 2020 (including 40.4 billion in the first six months of the year), after 53.3 billion euros. ‘euros in 2019, However, this figure is much lower than the 113 billion credit renegotiations recorded in 2017.
Since the start of 2021, we have seen rate cuts approaching their historic low again at the end of 2019 and thus still offer borrowers the possibility of lowering the rate on their mortgage thanks to a repurchase or renegotiations of credits.
On average, the rates are currently 1.05% over 15 years, 1.25% over 20 years and 1.45% over 25 years but we can get at best 0.55% 15 years, 0.78% over 20 years and 1% over 25 years.
Significant savings, especially for recent loans and more than 2% …
Overall, all loans taken out at more than 2%, corresponding to those that were taken out before mid-2016, have the potential to be renegotiated. “We consider that a difference point (1%) is needed between the rate of the loan to be renegotiated and the current rates for the savings generated to make the operation interesting given the costs incurred which can reach up to 3 % of the outstanding capital… But a difference of 0.70 point may be sufficient for recent loans, over € 300,000 or with durations of over 20 years., hence the need to study the relevance of the operation so as not to miss an opportunity to achieve savings ” explains Sandrine Allonier, research director at Vousfinancer.
Indeed, for loans of less than 5 years, the operation is even more interesting because it is at the beginning of the loan that we reimburse the most interest. (up to 50% of the monthly payment the first two years for loans over 20 years has more than 3% and even up to 60% for loans over 25 years). This is therefore when a buyback will have the most impact on the total cost of credit …
The possibility of reducing the duration of his credit to maximize the gain … or on the contrary to extend the duration to reduce his monthly payments more significantly
When buying back his loan by another bank, several choices are available to the borrower:
Is stay on the same remaining credit term and reduce your monthly payment thanks to the drop in rates Either reduce the duration of the loan while keeping the same monthly payment and thus maximize the savings made on the total cost of credit
Either extend the duration of the credit, up to 5 years maximum, and thus further lower its monthly payment …
Example: Couple having borrowed in February 2016, 300,000 euros over 25 years, and wanting to carry out a renegotiation operation in February 2021.
– Income: 4200 € net / month
– Initial interest rate (excluding insurance): 2.50%
– Total initial monthly payment (excluding ass): € 1,345.85
– Debt ratio: 32%
– Amount of the new loan (all redemption fees included: early repayment indemnity, guarantee fees, brokerage fees): € 262,743
– Remaining term: 20 years
Choice 1 : Lower the monthly payment while maintaining the remaining loan term.
– Interest rate of the new loan: 1.10%
– Duration of the new loan: 20 years
– New monthly payment: € 1,220 or a monthly saving of € 125.85
– Debt ratio: 29%
– Total gain over the loan period: 30,180 euros
Choice 2 : Keep the same monthly payments and lower the remaining term of the loan
– Interest rate of the new loan: 1%
– Duration of the new loan: 18 years, i.e. 2 years of savings
– Monthly payment: € 1,345.85
– Debt ratio: 32%
– Gain on the total cost of the loan: € 32,300 euros
Choice 3 : Significantly lower the monthly payment by extending the remaining period by 5 years
– Interest rate on new credit (excluding insurance): 1.40%
– New monthly payment: € 1,038.5, i.e. a monthly saving of € 307.35
– Duration of the new loan: 25 years
– Debt ratio: 24.7%
– Gain on the total cost of the loan: € 20,217
With the possibility of doing a new project by releasing a new borrowing capacity with a monthly payment of 300 € / month …
It may be interesting to have your loan redeemed by a bank that agrees to extend its duration, most often a maximum of 2 years, but up to 5 years with one of our partners. This makes it possible to significantly lower the monthly payment and thus gain monthly purchasing power, or to reinvest this new repayment capacity in a new project, a rental investment for example.
Youfinance advice for those who have not yet renegotiated their loan
1) Competition between banks because even very low, the rates vary from one bank to another according to the profiles.
2) Prepare your file well because the bank will ask for the last 3 statements of account, the last 3 payslips – beware of partial unemployment! – and especially the reimbursement statement in order to know how much you still owe your bank, which can sometimes take several months … Anticipate!
3) Be aware of the costs with early repayment penalties which must be paid to the old bank (3% of the outstanding capital with a maximum of 6 months interest), administration fees and guarantee fees 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.
4) Make the choice if possible to reduce the remaining term of his loan by keeping the same monthly payment because the savings generated will be greater thanks to a lower rate over a shorter period and faster amortization of credit.
5) Take the opportunity to find loan insurance better suited and / or more competitive and thus maximize the savings generated by the renegotiation operation
6) Plan to keep your property – and therefore his credit – still 2 years minimum because during a redemption, we start again at the beginning of the loan with, consequently, a slower amortization the first years …