As you probably know, mortgage rates have never been so low. It is quite easy, to obtain nowadays, a financing well below the bar of 2% except insurance over 25 years and 1.5% over 20 years. This is the perfect time to buy real estate or renegotiate your loan. This will significantly reduce your credit life or the amount of your maturities. In some cases, you can even reduce the duration while having a lower monthly payment than your initial loan. As a broker, I have for reference the 3 following points to know if it is interesting to renegotiate an offer or not:
1) The amount of outstanding capital must be close to € 100,000.
2) The remaining time should be close to 10 years.
3) The new rate must be at least 1 point lower than the initial offer.
Negotiate with the banks.
The news is therefore conducive to embark on one of the operations mentioned above. But for all that, does the borrowing rate have to be or is it the only criterion to be taken into account in making its choice?
Indeed, before detailing my remarks, it is important to specify that the banks are warring at a rate cut in order to recover you as a customer and thus be able to start with you a long-term commercial relationship. It’s quite understandable and legitimate. That is why a bank will only lend you money in return for a direct debit of your wages. This is the sinéquanone condition. Credit card, checkbook, home insurance, car insurance or savings can be strongly claimed. These are all weapons that must be used to negotiate with the bank.
What are the criteria to consider?
Now that you know this, you need to be sure that the bank you are going to engage with has other benefits than the borrowing rate. And that’s precisely what I want to talk about in this article.
Here is the list of points that seem essential to me to make the right choice:
1) The borrowing rate
2) The insurance rate
3) Modularity of deadlines
4) Transferability of the loan
5) Penalties in case of early repayment
6) The responsiveness of your interlocutor.
The borrowing rate
Even if the preamble of this article tries to prove that the borrowing rate should not be the only selection criterion, the fact remains that it remains the point number 1. It is the one that holds in a first time your attention. The differences in rates between banks are not that important. However, it is common to note that some establishments favor a certain clientele. Here we raise a very important point about the role of the loan broker. Indeed, unless you take the time to meet all the banking agencies of your city, it will be very difficult for you to know these particularities. In addition, a loan broker can take advantage of certain additional haircuts through his intermediary. Banks, to face ever tougher competition may offer some latitudes on their base grid. This can even go up to 0.35% in some cases. To summarize: a very good rate over 10, 15, 20 and 25 years is respectively 0.80%, 1.15%, 1.40% and 1.70% (excluding insurance).
The insurance rate
This is a point that has all too often been left out. And yet, its impact on the overall cost of your loan is substantial. Especially after 30 years. Banks rely heavily on it to recover a little margin. Thus, and even if they are not in their right, some banks will charge you their group insurance. Some are interesting, but others on the contrary will make you pay the high price. That is why a bank that allows you to go through a delegation of insurance must be a criterion in your selection. For example, it is easy to obtain differences of up to 0.30%.
Modularity of maturities
It often happens that people ask themselves the question of the duration of their loan. It is a choice that is not necessarily obvious. A long duration will allow you to lower your deadlines and therefore to increase your budget and indirectly the number of m2 you want to buy. On the contrary, a shorter duration will allow you to repay your capital faster. My opinion is: Rates are so low, even for long periods, that it is much more interesting to focus on the first option. In this hypothesis, an option could help you: the banks very often offer maturity scalability options. This means that you will have the choice to decrease or increase the amount of your monthly payments. This mechanism has a direct effect on the duration of your loan. Some institutions will even allow you to change the duration of + or – 5 years, while keeping the same rate of course. This is a point that should not be neglected. Take the time to study what your bank will offer you.
The transferability of the loan
It is certainly the most unknown option on this list. Few banks offer it. The portability allows you, during a resale purchase, to be able to transfer your remaining capital due to a new acquisition with the same rate conditions. Since rates have never been so low, this option may prove very advantageous in the future.
The responsiveness of your interlocutor
This is a point that comes up very often in my discussions with my clients. Indeed, many complain about the non-reactivity of their banking interlocutor. The fact of going through a broker is often the result of a lack of service or requests for information from the customers remained unanswered. Thus, this point could tip the balance towards this or that bank. As a broker, we know the agencies and interlocutors. For a couple in a hurry to obtain funding, we will send their file in a reactive bank for example, with an agency director with decision-making power internally.