In a context of low interest rates, the competition is clearly to the advantage of borrowers, despite the tightening of access conditions. This is why trading should not stop at just the interest rate. Here are 6 tips to save on the cost of your mortgage and all the details to negotiate better.
Subscribe to additional services and save on booking fees
Although they have only a small impact on the cost of mortgage, the application fees should not be overlooked. They generally represent 1% of the loan amount, limited to $ 300 for small amounts and $ 800 for larger loans (1) :
(1) average observed according to the banks.
Tip number 3: negotiate free administrative fees in return for subscribing to services offered by the bank: savings book, home insurance, etc. Planned savings: $ 500 on average.
Finance your acquisition with two lines of credit
The nested or nested loan technique is only used by the most sophisticated borrowers. Apart from subsidized loans whose duration is shorter than the main loan, it is possible to use smoothing with two main loans, which has the effect of lowering the average rate and consequently reducing the monthly payment.
The first will be taken out over a long period, for example 25 years, the second loan over a short period, generally between 7 and 10 years. This strategy will initially have 2 direct impacts on funding.
- The rate on the second home loan will naturally be lower than the first. The gain is currently almost a point between 10 and 25 years.
- The overall monthly payment will therefore be higher.
To overcome this drawback, it is necessary to practice smoothing the long loan.
Tip number 1: mounting financing with 2 loans also saves on the cost of borrower insurance.
Optimize the use of regulated loans
Do not make the mistake of refusing a regulated loan on the pretext that it must be repaid over a short period. The Action Logement loan, for example, must be repaid over 15 years. Even if the main loan is 20 or 25 years, be aware that it can be smoothed, that is to say that its monthly payment can be lowered while waiting for the short loans to be repaid. This banking technique allows you to benefit from a regulated loan even if its monthly payment seems high at the start.
This is also the case for PEL or CEL loans, the amount of which partly depends on the repayment duration chosen. We advise you to choose a short term, between 5 and 7 years and to smooth the main loan to reduce the overall monthly payment.
Tip number 2: think about local help with home ownership. Indeed, many town halls offer financial assistance to first-time buyers, complementary to the state PTZ.
Prefer mutual deposit rather than mortgage
Mortgage registration is no longer in vogue and banks prefer to go through a mutual guarantee company, deemed too restrictive. It is also your interest because the deposit is generally more economical than the mortgage. These companies are also generally the product of banking groups.
Apart from the financial gain which results from this choice, the interest lies in a more flexible management of the files in the event of failure to pay the installments. Indeed, the surety company will initially seek an amicable solution, the sale of the property, unlike the mortgage, is only considered as a last resort.
Tip number 4: many network banks use CREDIT-LOGEMENT. Note in this case that your contribution is composed on the one hand of the commission of the company and on the other hand of the participation in the guarantee fund. On the initial contribution of $ 2,350 (“classic” scale on a loan of $ 200,000), CREDIT- LOGEMENT gives you back the part of the guarantee fund at the end of the loan : Savings for the borrower: $ 1,372.
Subscribe an external insurance delegation
If there is only one point that you have to negotiate outside of the interest rate, it is borrower insurance. Its impact on the cost of credit is very significant and deserves special attention. Beyond the pricing approach, it is necessary to take time to read the general conditions and in particular the chapter related to exclusions. One of the difficulties you will face is the comparison of rates between an external delegation contract and the group banking contract. In fact, more often than not the rate of delegations taken out with insurers external to the bank is calculated on the capital remaining due, which allows an annual declining premium. That of the lending organizations applies to the borrowed capital making the contribution fixed throughout the duration of the mortgage.
To compare two insurance contracts with the different calculation method, the easiest way is therefore to assess the total premiums paid over time.
Tip number 5: it is not widely known to the general public, but some insurers like AFI ESCA offer single payment contracts. You pay all of your contributions in one go at the start. This “advance” allows you to obtain a discount of around 20%. Savings to be expected on a loan of 200,000 euros over 20 years, up to 2,500 $.
Learn how to negotiate prepayment penalties
Negotiating prepayment fees is not a win-win situation. Banks are doubly hesitant to remove penalties:
- First, terminating a home loan costs money
- Then, this negotiation seems to indicate that the borrower does not plan to remain a customer for a long time.
We must therefore approach this discussion from the first interview and be firm. Note that the penalties represent the equivalent of six monthly payments, limited to 3% of the share of principal repaid.
Tip number 6: to convince the bank that you do not plan to repay your mortgage in the short term, we advise you to negotiate a gradual reduction in penalties. You can for example offer your banker 3% up to 5 years, 2% from 5 to 7 years, 1% from 7 to 10 years and zero penalties thereafter.