A credit buyout or renegotiation involves taking advantage of lower rates to improve th
e terms of your loan. The benefits are many. You can in particular divide your monthly payments by two or three, benefit from a longer repayment period. But for the operation to be really beneficial, you must pay attention on a few important points, points which are detailed here.
Decide on the buyout based on the capital owed
Renegotiating involves a new contract, a new start. However, the transaction is only really timely if the capital remaining due is relatively substantial. Remember that you will have to bear additional charges such as application fees and prepayment penalties. The rate reduction will only be favorable to you if it covers all of these costs. To find out the capital owed, refer to your initial amortization schedule. By subtracting the monthly payments already paid, it will be easy for you to know the capital remaining to be settled.
Redeem as soon as possible
There is absolutely no point in making a buyout or renegotiation two years from the end of the contract. You’re just going to increase your loads. Redeem before a quarter or half of the repayment period has expired. This allows you to expect a significant saving.
Also renegotiate your borrower insurance
Insurance constitutes between 20 and 30% of the charges that you must bear in your mortgage. It is therefore crucial to renegotiate the latter’s rate properly so that the renegotiation is as profitable as possible. If you have previously opted for group insurance, this will be automatically canceled upon redemption. For a renegotiation, it will be readjusted according to the present situation. If you have opted for a delegation of insurance, you can either take out new individual insurance or take over the old one but renegotiate it to be in adequacy with the capital remaining due. A good renegotiation of insurance can produce a total gain of up to $ 9,000 or $ 10,000.
Always do a credit buy-back
Your objective must be to find the best offer at the best rate so that your mortgage or personal loan comes back to you as cheaply as possible. To do this, there are online tools, very powerful and yet free, credit buyback simulations and loan comparators. You will be able to compare the offers one by one with all the necessary information, TEG, credit duration, monthly payments.