Falling mortgage rates: renegotiation or buyout?

2016 continues to present very attractive mortgage rates, overall durations! With competition from banks, the records observed in June 2015 are about to be broken.

If you took out your loan before 2014, renegotiating it or having it redeemed is all the more beneficial.

Renegotiating a mortgage, an operation less and less sought after


As highlighted in the February 2016 edition of the Fine Bank info on loans to individuals, 31.2% of the real estate loans taken out last February came from a renegotiation. This figure was 54.5% in August 2015. However, this operation can save you up to 20% of the total cost of your loan!

In the short term, renegotiating your credit can sometimes be more economical than buying it back. Also, it is sometimes faster to achieve. However, note that administration fees may apply.

What explains this drop in interest in renegotiation directly with the lending bank? The interest rate that can be obtained from a loan repurchase is surely the answer.

Really take advantage of mortgage rates by redeeming your loan


The redemption of your credit also incurs costs. The early redemption indemnities (IRA), which are often estimated at 3% of the capital remaining due, are an expense to be expected.

But rest assured: they are capped at an amount equal to 6 months of interest and, by renegotiating with your current bank, can be lowered or even abandoned.

The transaction involves other costs, notably related to warranty fees but also brokerage fees, if applicable and depending on the broker.

As part of a mortgage guarantee, these are expenses related to changes made to the characteristics of your mortgage. Finally, be aware that in the case of a guarantee carried by a surety, part of the current bond will be returned to you once your redemption has been made.

But then, why is it worth buying a loan? The savings linked to a better mortgage rate can amount to thousands of dollars. In the long term, a bank’s offer offering you a lower rate can, therefore, compensate for the fees detailed above!

If you have repaid more than half of your loan, having it redeemed generally saves you money on your loan insurance. Conversely, a redemption made during the first half of the repayment plays mainly on the financial weight of the interest.

Home loan buy-back, a tailor-made solution


A change of lender is also an opportunity for you to redefine your financial priorities. If you have the capacity, you can, for example, reduce the duration of your repayment by paying higher monthly payments.

Thus, you reduce the total cost of interest and pay less loan insurance costs. In the event that you wish to take advantage of the operation to benefit from a more flexible budget, you can lower your monthly repayments while maintaining or extending the duration of your loan.

This makes it easier for you to meet other needs while enjoying valued purchasing power.

Finally, be aware that a simulation with a mortgage broker is free and without obligation. It allows the study of your situation by specialists who will be able to advise you and find for you the most advantageous offer with regard to your profile.

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