There is no point in trying to negotiate the interest rate on your mortgage with the lending bank if the total amount of your additional costs is prohibitive. Discover 5 tips allowing you to benefit from the best conditions for your mortgage.
With a rate of less than 3% for a repayment term of 20 years, mortgage rates have never been at such a low level. If you have a real estate project, now is a good time to make it happen. But you must be vigilant when negotiating your loan with the bank: do not fix your attention only on the nominal rate because the real cost of the loan depends on the Effective Total Rate (TEG). This includes all the costs of setting up your credit, which you need to study closely because these can save you a significant amount.
1 – Reduce administrative costs
When you meet your bank advisor, he will perform various simulations depending on your profile. If you are a good customer (employee, with all of your bank accounts domiciled in the bank, presenting no aggravated health problem, etc.), the preparation of your file will be easy. You can then negotiate a reduction in the amount of the application fees. Going through a broker, it is to him that you pay the administrative fees: you therefore have nothing to pay to the bank. You can also negotiate the file fees with the broker if your file is easy to assemble.
2 – Negotiate the price of insurance
When you take out a home loan, you must also take out borrower insurance to cover yourself against the risks of death, disability and incapacity for work. This insurance provides the bank with a guarantee that the monthly installments will be reimbursed, even in the event of financial difficulties following a disaster. You can take out cheaper loan insurance than that of your bank, on the condition that the outsourced contract (delegation of insurance) is at least equivalent guaranteed.
According to Hamon law, if you have taken out a loan since July 28, you can replace your insurance contract within one year of taking out it. To do this, send yourself a letter informing your banker that you wish to set up another contract at least 15 days before the end of your first year of coverage.
Thanks to this possibility, you can make substantial savings, especially if you are young. You can indeed save up to 20,000 dollars on the overall cost of your mortgage by negotiating your credit insurance.
3 – Negotiate additional services
You are unable to sell your banker and wish to benefit better. Concentrate on ancillary services. Your banker will be delighted to have you take out, alongside your mortgage, a home insurance contract to insure your house or apartment. Also tell them that you are ready to save with their bank by finding out about current savings products such as the passbook A or PEL. This way you will get a commercial gesture from him on your mortgage.
4 – Beware of prepayment penalties
If you sell your property in order to move to live elsewhere, or to become the owner of a larger dwelling, you will have to pay the bank prepayment penalties. Their amount amounts to 3% of the capital remaining due, with a ceiling of 6 months of interest. It is quite possible to negotiate or even cancel them in case of resale of the property to buy another. Do not forget to request a modification on this point in your credit agreement before signing it.
5 – Check the transferability of the credit
Remember to check that your loan is transferable because it allows you to save later, by benefiting from lower rates on your future acquisitions. If you buy another home a few years later, after selling the first property related to your loan, you can transfer your loan to buy a new home. You will only have to borrow the missing amount.