The extremely low rates offered by banks for new home loans can make you want to borrow. Especially if you compare them to the rate you bought with this same bank a few years ago for the purchase of a new home. Fortunately, it is possible to renegotiate your loan and get a reduction in your rate. Here are the different criteria to consider when renegotiating your loan.
The rate differential is to be taken into account
The difference between the rate of your loan and the current market rate must be significant. Indeed, renegotiating a loan entails fees that can be significant. It is therefore essential to ensure that the difference is at least one percent (1% vs. 2% for example) for the renegotiation is viable and actually reduce your monthly payments.
The number of years remaining in your current credit is also important
Your monthly payments consist of the reimbursement of interest and principal. But the share of interest / capital varies over time. In the beginning, you only pay interest, whereas at the end, the bulk of your monthly payments are dedicated to the repayment of capital. This is to say that if you have only 2 years of repayments on a 20-year loan, reducing your interest will not help, since you have already paid for it. On the other hand, if you took a loan at 30 in 2010, you have everything to gain by renegotiating your loan.
Have good relations with your bank
This is probably the most important topic for you to renegotiate your loan. A pressure tactic from your bank can make it ready to reduce your interest. Indeed, your bank has no obligation to respond favorably to your request. If you have a good relationship with your banker. This will help you win your membership. Moreover, if your entire family is in the same bank or you have subscribed to other loans (automobiles …), financial products, or high-end credit cards, for example, there is a good chance your application is approved.
Competition can be helpful
If your relationship with your bank is not good, nothing is lost. Indeed, competition can work in your favor. Refer to offers from other competing banks at your meeting with your banker to negotiate loans. And if that’s not enough, all that’s left for you to do is subscribe to a loan at another bank. Again, many fees are to be taken into account if you open an account in this new bank (fees …). It is also possible that your own bank decides to penalize you for this lack of loyalty (prepayment penalty for example). Do not forget that the subscription to new insurance (death, unemployment) can make the positive effect of a renegotiation of loan null and void.