Totally Frenched Out

From the blogger formerly known as Samdebretagne

Saturday, April 15, 2017

Faire racheter son pret immobilier, part 1

This is a post for those of you who are lucky enough to own a home in France (and unlucky enough to still be paying it off lol).  If you haven't heard yet, interest rates in France are at historic lows.  Like so low, the banks are lending money almost for free, at least when you take inflation and the yearly value your bien will gain into account.  It's true that they've gone back up slightly in the past month or two, but it's still a steal if you've got a mortgage or you're looking to get one.

Just to give you an idea, when we signed our mortgage 2 years ago, we also got one of the lowest rates France had seen in a long time - 2,85%.  Now we are going through the process of refinancing our mortgage, and we just received an offer at 0,95%.  So I thought I'd share a few things we learned along the way. 

Initially, we'd planned on paying down a significant amount of money in cash that we've managed to save up over the past few years.  Being mortgage novices, we assumed we could pay off the lump sum and then refinance for a lower amount. After nearly a three month wait, we found out this was not the case and we lost out on the 0,85% interest rate.

If you want to pay money down, you need to first pay your current lender (and there is a small penalty fee that comes with it - I believe 3-6 months' worth of interest), and once that has gone through, you can then start the process of either renegotiating or refinancing your mortgage.  This will take a few months however, so you'll have to decide whether or not it's worth doing that and risking interest rates going up.

I'm mainly going to talk about refinancing here though, because very few banks will accept renegotiation (because what do they have to gain?), unless you have already done the work of finding a few other hard offers from competitors and you can force their hand.

First, there are a few questions you need to ask yourself:
  1. Do you have more years left on your mortgage than you've paid back?  For example, for a 20 year mortgage, do you have at least 10 years left? 
  2. Do you still owe a large amount of money?  (Some sites estimate this as 50,000€, some 75,000€)
  3. Is there at least a 1% difference between your current rate and the rates offered now?
  4. How much will your lender charge you in penalty fees? 
  5. Do you have time to devote to the process? (It took C one full day to compile everything and then we had to have rather lengthy meetings with each bank). 
There are websites out there that can help you calculate all of this.  C was initially hesitant about the process given how time-consuming it was and how little time we both currently have, but it only took a quick estimation on MeilleurTaux to show him how significant the savings would be.

This is getting long again, so more on the next steps tomorrow!

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Blogger Eileen said...

We've actually done this twice already since we bought our home in April 2014. But our loan is through the CASDEN, where you earn points that you can then use to lower your interest rate. The first time we shopped around and realized that it wasn't worth switching (it was a little cheaper to stick with the CASDEN and use our points, though I actually would have liked to leave the Banque Populaire!) and the second time we didn't bother, we just used our points and lowered it again. J has been gung ho about this from the beginning, so I haven't followed it much. I don't actually know what our interested rate is now---it was 3% in 2014. We reduced from 20 to 17 years the first time so our monthly payments didn't actually go down, but the second time they went down by 50€, which is nice!

April 15, 2017 at 11:21 AM  
Blogger Ksam said...

@Eileen - Interesting, I have never heard of the CASDEN! How do you earn the points? I'll have to try to google it to learn momre.

April 17, 2017 at 9:52 AM  

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