How is the repayment of interest distributed throughout the loan?
The vast majority of mortgages are amortizable. The peculiarity of this type of loan is that the maturities are identical throughout its duration. This distribution of interest has the effect that the monthly payments of the first years only reimburse a small part of the capital in exchange for a large part of interest.
Take the example of a loan of 150,000 euros over 15 years at a rate of 1.5% (excluding insurance) with monthly payments of 931.11 euros. The interest share breaks down as follows:
- 1 st year: 180 euros/month
- 6th year (same monthly payment amount): +/- 100 euros
The purpose of a loan buyback is essentially to take advantage of lower interest, it is strongly recommended to use it in the early years of its loan to achieve real savings and buy the mortgage at the best rate.
Credit buyback: savings for sure?
To find out if your credit redemption is financially attractive, factors other than borrowing rates should also be considered:
- Compensation (IRA or PRA) for early repayment. For a home loan the indemnities amount to 3% of the outstanding capital, capped at 6 months of interest. Since the Cogilaw Act, IRAs can also be applied to depreciable consumer loans, beyond a threshold of 10,000 euros of prepayment per 12-month period;
- Application fee;
- The cost of raising the potential mortgage related to the old credit and the fees of the one required with the new loan.
How to get a credit redemption easily?
Many organizations offer credit buy-back offers, each with its own acceptance criteria: maximum debt ratio, amount of household tax income, as well as the balance to be lived after deduction of the new monthly payment, etc. To know which one to choose according to your profile, do not hesitate to consult the opinions of consumers and to make play the competition.
To lower your monthly mortgage payments, also consider the borrower insurance change. The Cogilaw Company allows you to subscribe whatever you want, so play the competition!