Credit Renegotiation: What are the pitfalls to avoid?

Credit Renegotiation: What are the pitfalls to avoid?

How can you take advantage of low interest rates when you have already financed your principal residence, a rental property or a second home? This is the main goal of loan renegotiation. Unlike the loan buyback that involves by another institution, the renegotiation is offered only by the creditor organization . It is therefore a simplified procedure that only involves signing an amendment to the initial loan offer. However, we must be vigilant and negotiate the new credit features.

Under what conditions should renegotiation be preferred to the purchase of real estate loans?

The financial terms of a loan redemption are always more attractive than in a real estate renegotiation. The repurchase of credit implies a new loan, it amounts to his real estate project at current interest rates. Conversely, renegotiation implies that the institution that initially financed the investment will adjust borrowing conditions to be close to current conditions. The interest of the creditor institution is primarily to preserve its client portfolio.

Interest rates related to renegotiation are higher than for loan buybacks, but in reality this is less expensive . Indeed, there are no additional costs inherent in setting up a new credit (administrative fees, any brokerage fees, mortgage fees). In addition, the renegotiation of the mortgage loan avoids the prepayment penalties that are applied in case of repurchase of loan by the competition. In this sense, renegotiation is preferred for investors who have already amortized their mortgage.

Renegotiation is also an interesting option for homes that want to avoid any complexities. The repurchase of mortgage involves a change of bank. Indeed, the body that repurchases credit requires debtors to domiciliate their income. This can be a long and tedious process since it must be notified to all organizations acting on the bank accounts.

Finally, given the cost of a loan buyout by the competition, it is better to opt for the renegotiation of the loan by his own bank if we consider selling the property in the medium term.

The keys to better renegotiate his banker?

To obtain the best conditions for renegotiating your home loan, you have to negotiate with your banker. You should know that some commercial counterparties will be in your favor. For example, taking out an insurance contract, even for just one year, will undoubtedly lead to better renegotiation conditions.

Do not hesitate to negotiate with several commercial counterparts. The more the client is ready to develop the banking relationship, the greater the trading margin will be. In addition, as part of the sponsorship of a loved one, the bank can make an additional effort to propose more favorable renegotiation conditions.

If the borrower submits a competing bank proposal, then the institution will, most of the time, make the maximum to keep the credit outstanding in order not to see his client leave. This is a good time to negotiate at the highest rates of current loan interest rates.

Finally, it should be remembered that it is possible to maximize the gain of renegotiation by offering delegated loan insurance. Indeed, since the law in 2013, any borrower can replace the insurance of the loan during the amortization period. The only condition for an agreement on the part of the lending organization is the maintenance of the original guarantees or its expansion.

Bernardo Kramer

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