How to renegotiate your home loan with your bank: Renegotiating your loan means seeing your bank to ask it to review certain conditions of your loan.
Renegotiation and repurchase of credit are two little-known options that can nevertheless bring significant savings Lower your rate change insurance reduce the loan duration or even adjust your deadlines.
Matthieu Chirot explains to us:
The period during which many owners rushed to redeem credits sometimes exceeding 4%, seems distant today. In 2017-2018, however, this type of operation accounted for up to 70% of broker activity, compared to barely 10% in 2021. A trend which is expected to continue. “Even if a majority of French people have gone through the renegotiation box, it remains interesting to study the conditions of their current credit linked to the rate or borrower insurance. Particularly on this last point, which often remains poorly known to customers,” explains Matthieu Chirot.
And the specialist immediately specifies: “Possibilities still exist today to revise the rate downward, even though we are obtaining credits at 0.70% over 15 years, 1% over 20 years and 1.20% over 25 years “. The key: net gains of 10,000 euros, from 150,000 euros of credit.
Read also: How to Get The Best Home Loan Rate?
How to renegotiate your home loan with your bank
There are multiple reasons why a borrower may want to renegotiate their loan with the bank. Ultimately, the borrower will want to reduce their loan by taking advantage of a better rate. How to get there?
- Reduce the amount of the monthly loan payment: In the event of a drop in rates, the borrower can request a reduction in monthly payments to reduce their monthly budget. Please note: in the absence of a drop in rates, it is more strategic to carry out loan modulation, a less expensive option to reduce maturities.
- Reduce the duration of the loan: In the case of an increase in income, the borrower can increase his monthly payments and therefore reduce the repayment period.
- Combine these 2 possibilities: In the case of a rate reduction combined with an increase in the remainder of your life.
- Repay part of the credit: If you have a sudden increase in your income or an influx of money, you can ask the bank for early repayment, if the conditions of your contract allow it (prepayment compensation IRA).
When to renegotiate your home loan?
When you take out a fixed-rate property loan, you initially repay a major portion of interest and a smaller portion of capital. The phenomenon balances out halfway, only to reverse itself in a second phase.
It is when the proportion of interest is higher, the first third, or even the first half of the duration of the loan, that it is most relevant to renegotiate your credits.
To know if the right time to renegotiate your property loan has arrived, you must check a set of conditions that concern both your situation as a borrower and the financial market.
- be in the first third, or even in the first half, of repayment of the credit amount,
- have a minimum outstanding capital of €70,000,
- observe an interval of at least 0.7 points between the original rate and the new interest rates,
- possibly consider taking out a second Habitat loan, for a new property acquisition.
If one or more of these statements correspond to you, you can consider renegotiating your loan with your bank.
“We generally consider that the difference with the new rate must exceed 0.60%,” explains Matthieu Chirot. The outstanding capital must amount to more than 70,000 euros, with a repayment period of more than 7 years.
Are there loan renegotiation fees?
Who says loan renegotiation means the modification of the loan contract, hence an amendment? It is then possible that your bank will ask you for amendment fees (also called administrative fees). These vary depending on the credit organizations some apply a lump sum, others an amount proportional to that of the credit.
This budget line must be taken into account so that your efforts remain profitable. This is why the renegotiation conditions listed in the previous paragraph are important In the absence of sufficient potential profit, the costs of the operation will exceed the benefits that you will be able to obtain from your renegotiation.
The steps to renegotiating your loan with your bank
With your figures in hand, you can make an appointment with your bank advisor and request a renegotiation of your credit. If banks have no obligation to accept, they often do so to prevent their customers from going elsewhere with all their accounts and financial products.
Indeed, if the bank refuses but you estimate a real gain from the renegotiation, you will seek to have your loan purchased by another bank.
The real estate loan is a source of income for your bank, but also a premium product to build loyalty. However, if the bank refuses to review your loan rates, you can try your luck elsewhere and have your credit repaired.
A good renegotiation involves good preparation of your file. Monemploi.com, thanks to its online tools and brokers, supports you throughout your process with your bank.
1. Know current borrowing conditions
If you were to borrow today, what rates would be charged? To find out this information, we recommend our loan simulation. It is free and effective:
Precise figures and proof of an active approach will be all arguments to help you convince your bank to grant your request.
2. Estimate the various costs incurred in the renegotiation
Renegotiating your loan may incur new costs, which must be taken into account for a truly winning approach. Amendment fees, also known as processing fees, may be applied by the lending institution since you are modifying the initial loan contract.
3. If the renegotiation does not satisfy you, consider loan redemption
The main difference between a credit renegotiation and a credit repurchase lies in the interlocutor:
- We renegotiate our loan with our current bank
- You have your loan repurchased by another credit organization.
Credit refinancing can be a relevant solution, but it is more expensive: application fees, payment of early repayment compensation (IRA) to your bank, and guarantee fees. This option may apply in the event of a large difference in credit rates.
Borrower insurance: Think about delegation
Another lever to reduce the total cost of your loan is to use borrower insurance. In most cases, group insurance (bank insurance) has been offered to you or even imposed. The good news is you can terminate the contract after one year ( thanks to the Sapin 2 law or “Bourquin law” ) This is the opportunity to choose new insurance with the same guarantees but less expensive. Renegotiation or change of borrower insurance contract is a real source of savings.
To cancel this insurance, a few points must be respected:
- two months’ notice,
- change to the anniversary date,
- guarantees validated by the lending organization.
Knowing that the cost of insurance can represent up to 30% of the total cost of the real estate loan, this operation should be seriously studied.
Renegotiating well also means making the right choices. So, when renegotiating your property loan, play on the duration of the credit/reduction in the repayment period rather than on a reduction in monthly payments.