Real estate loans are still close to historical thresholds, the average for all durations.
For holders of a loan, the period is therefore conducive to renegotiation of loans and save several thousand dollars. euros.
Rates still favorable to borrowers
The number of real estate loan buybacks has exploded in previous years, as borrowers sought to take advantage of falling rates. Despite this, many owners still have an interest in renegotiating their debt or restructuring their loan. Indeed, after a slight rise initiated at the end of 2016, rates have started to fall again in 2017.
The trend should continue, at least during the first months of 2018, for all terms. The best profiles could even negotiate a rate of between 1.30 and 1.48% for a long-term loan (20 years) and only 0.91 to 1.00% for a loan over 10 years.
What are the conditions for a loan buyback?
A loan buy-back is only advantageous if the credit is still young, ideally in the first third of its existence, with a capital still outstanding. Less than 5 years from the deadline, it loses its appeal. To reduce the overall cost of financing, it is then preferable to change borrower insurance, the possible savings sometimes reaching tens of thousands of euros.
Another condition is a minimum of 100 basis points difference between the old and new interest rates. This difference offsets the costs generated by the transaction: early redemption fees, guarantee transfer fees, file fees, etc. It must therefore be verified that the potential gains are significantly higher than those incurred by the breach of the current contract.
A simpler and faster way to pay less is to renegotiate your loan with the current bank. If accepted, the formalities are limited to an amendment to the contract, but the proposed new rate may not be as attractive as that granted by a competing institution.
Reduce its loan term or monthly payment?
In the context of a loan purchase, the borrower can opt either for a reduction in the repayment period or for a reduction of his monthly payments, or both at the same time.
From a purely financial point of view, it is better to shorten the repayment term to the maximum without changing the monthly payments, or increasing them if it has the means. By paying back more quickly, the amount of interest and credit insurance premiums are reduced. But in case of financial difficulties, lower monthly payments is advisable, the difference on each payment to meet other needs.
In view of a further increase in rates, it is urgent to perform a simulation to find out whether or not it is still wise to embark on a real estate loan buyout .