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