What is the purpose of renegotiating a mortgage?
Loan renegotiation simply involves renegotiating the terms of the original contract to lower the overall cost of financing. It is open to everyone, including retired seniors, even if it is sometimes refused by the bank that holds the debt.
Often, it is the interest rate that crystallizes the debates between the borrower, who intends to lower it, and the lender. The current period is also favorable to real estate renegotiation since rates have never dropped to such low levels. Seniors over the age of 60 who have been repaying a loan for several years at a high rate may legitimately wish to take advantage of the economic situation to reduce interest. But not only since negotiating loan insurance can also be an attractive strategy to reduce the cost of borrowing.
But why do banks agree to renegotiate if they lose money? It should be noted that when a professional applies a lower rate than the original one after a renegotiation, he agrees to eat away his profits. For banks, the challenge is no longer really to maintain a high profit margin with the mortgage, but rather to extend the banking relationship with customers and to profit in the long term. And after 60 years, seniors can have a range of insurance and savings products at their banking establishment which gives them a significant negotiating force.
What if the bank does not want to renegotiate the mortgage?
A refused renegotiation request may encourage the senior to inquire about the commercial proposals of competing banks. If more advantageous terms are offered by another institution, such as applying a lower interest rate, then the borrower may consider having their loan redeemed. It is the principle of the repurchase of mortgage which is an alternative to renegotiation.
In addition to ordinary establishments, seniors can also approach an intermediation expert who takes care of putting them in touch with their banking partners. The proposed operation is then a grouping of mortgage loans. Very simply, the borrower will redeem his home loan as well as the other debts of his home to gather them around a reduced monthly payment and composed of a single interest rate and new conditions.
Nevertheless, the senior must carefully study the sums that he will save after the repurchase of his loan by deducting the Prepayment Allowances (IRA) for the benefit of his old bank. The fees (IRA, booking fees, brokerage fees) are incorporated into the Annual Effective Annual Rate (APR) and are paid during the repayment of the credit to the new establishment. The transaction must also be carried out during the first third of the initial contract, where the majority of interest is to be paid, with a capital remaining due greater than $ 50,000 and a minimum reduction in the rate of 1 basis point.