Loan Renegotiation VS Loan Redemption
The bank in which you took out the initial loan can not buy back its own debt, the only possibility to benefit from the lower interest rates is to renegotiate the borrowing rate applied. The other parameters remain unchanged (Loan Insurance, Lifetime Insurance for each borrower). Of course, a possible decrease in the borrowing rate will have an impact on the duration of the loan or the monthly payment.
Loan buyback can only be offered by another bank. This involves a change in the set of parameters since you leave on a new loan. The object of the loan is the outstanding capital due from your bank. Thus, the insurance that relates to the initial loan become obsolete, it is then necessary to adhere to a new insurance. As for any loan file, you will have to pay a fee.
How to make your choice?
It is essential to start by reviewing your initial loan offer, which will allow you to have several elements essential to any loan buyback or renegotiation process. First, the amount of prepayment penalties . The latter can not exceed 3% of the Remaining and amounts in general to the sum of the interest for the six months following the repurchase transaction. These penalties limit the gain of a possible redemption. Moreover, if there are several phases of repayment (to see in the initial depreciation plan), it will be useless to consider a renegotiation of the loan by your bank. Indeed, it is impossible to change the interest rate applying to loans by maintaining the same repayment phases.
In a second time, it is better to approach the competition to see what we can offer you as part of a buy. You can rely on the help of a broker, who will find for you the best proposals on the market. If you took out your loan before 2007, you may be surprised at how much you could save through this transaction. Do not forget to take into account any potential early redemption penalties. You can self-finance them or include them in the amount to borrow as part of the redemption.
After having one or more proposals from the competition, you can then ask your banker for a renegotiation proposal. If the renegotiation rate is often less attractive than what the competition proposes, the advantage of a renegotiation is the absence of an early redemption penalty.
The process of renegotiating / buying real estate loans , it takes time, but the gain you can get is really worth it. Especially since it will allow you to lighten your monthly payments if your borrowing burden is too heavy. For any questions, you can contact an Excellia Finance advisor.