When interest rates fall, borrowers can study the impact of a renegotiation, relative to the costs involved. And, failing that, mention a loan buy-back, if the bank is not willing to renegotiate enough.
When rates go up, it is possible to switch your credit to a fixed rate, if it was built on a variable basis. In all cases, the assistance of a broker is recommended to negotiate the costs generated by these operations and help you fully assess their feasibility.
Home loan: rates are falling, what to do?
Should we renegotiate or redeem our credit?
Before starting renegotiation of interest rates with your bank, you must know the costs associated with this operation:
Early redemption indemnities (IRA) – not to exceed 6 months of interest on the capital remaining due and 3% of the capital remaining due. Application fees, up to 1% of the capital due.
The costs associated with the guarantee, up to 2% of the principal remaining due, as part of a mortgage guarantee, the most common.
Beyond these costs, it is also a question of taking the right measure of the operation in terms of borrower insurance. Varying between 0.10 and 0.40%, its rate directly influences the total cost of credit. However, not all insurance is created equal when looked at carefully. Finally, you must take into account the evolution of your personal situation and the possible resale of your property in the coming months.
If your bank does not give you complete satisfaction in this negotiation, you may consider consulting another establishment. Concretely, this will result in a buyout of your current home loan.
Note that it is possible to obtain satisfactory renegotiation conditions in a different branch while staying with the same bank.
Home loan: rates go up, what to do?
Switch your variable rate loan to a fixed rate?
In the context of a rise in interest rates, the only room for maneuver that you have is to switch your mortgage to a fixed rate, if it were constructed with a variable rate. It is still necessary that this clause is well written in your loan contract.
Note that there is also the option of switching to a fixed rate, allowing borrowers to switch the rate on each anniversary date of the credit. An option to follow the market and protect yourself from too large lifts.
Naturally, the transition from the variable rate to the fixed rate is not without cost. Not to mention that justified by an increase in rates over the medium and long term, this transaction will systematically generate a higher fixed rate than that of your initial credit.
You can choose to compete and decide
To get a new mortgage by paying off your current loan. Again, it remains to properly assess the costs associated with this approach, especially in terms of prepayment penalties.
A strong or lasting variation in rates – downward as well as upward – implies asking the right questions, depending on the economic situation and your personal situation. To support you and, if necessary, help you negotiate the various points, do not hesitate to contact a mortgage broker. His know-how will be your most precious asset.