3 things to check before buying out your mortgage loan

Mortgage rates rebounded slightly at the end of 2016, but still remain attractive today.

Takeover home loan

For borrowers, it is not yet too late to redeem credit . That said, for the operation to be interesting, it is important to be attentive to several points.

Real Estate Loan Redemption: Things to Consider

Since January, most banks have raised their mortgage rates.

Nevertheless, experts believe that it is still too early to talk about a reversal of the trend.

For a credit over 20 years, real estate rates average 1.85% in 2017, against 2.05% in 2016, while the minimum rate is 1.24% against 1.41% one year more early.

The moment is thus always favorable to realize a repurchase of credit.

However, to find out if it’s really worth it, you need to consider the following three criteria :

  • The duration : it must be in the first third of the repayment, period where you normally pay the most interest.
    For example, for a 20-year loan, the redemption must be made during the first six years of repayment to be profitable.
  • The rate differential : the difference between the old and the new rate must be at least 0.70%. For your convenience, know that online simulators exist to help you compare the real estate rates offered by different banks.
  • The outstanding capital : the amount of capital you have to repay must be more than 70,000 euros. Below this, the credit institutions will estimate that the amount is too small to warrant a buy-back.

Serious savings in perspective

Redeeming your credit can save money, as the following simulation shows.

For example, for a loan taken out in April 2014 at a rate of 3.30% excluding insurance and repayable over 20 years, redeeming a mortgage in 2017 at a rate of 1.55% will allow you to:

  • Reduce your monthly payment by about 13% (969 to 840 euros).
  • To lower the cost of your credit by 27,000 euros.

Instead of paying € 48,131 in interest on the outstanding credit, you will only have to pay € 20,797 (new credit).