For those who have taken out a mortgage, its sustainability is very important. As is known, in recent years the Government Agency carried out by the Medium Centrum Bank, led by Mario Draghi, has produced a significant reduction in interest rates, which have even gone below zero.
The new triggered situation had significant repercussions on a series of contracts relating to financial products that had been stipulated in what we could define as another historical epoch.
Among the products in question there are also mortgages, contracts perhaps before the crisis of 2008, the one that followed the bursting of the Subprime mortgage bubble or in the years immediately following. Years during which interest rates were significantly higher, with obvious repercussions on mortgage repayment plans.
Precisely in order to remedy a completely new situation, many borrowers, in order not to find themselves in difficulty due to the considerable variations in interest rates, have started to look around for a solution. For example, identifying it in the so-called renegotiation of the mortgage: what is it?
What is mortgage renegotiation and why should it be done?
By renegotiation of the loan is meant the modification made to the conditions of the same, agreed with the lender, whether it is a banking or financial institution. This increasingly widespread practice can be used to remedy a completely new situation on the financial markets that can cause damage if the contract originally entered into is maintained.
Among the cases that can lead to a similar decision, we should mention in particular:
- a significant reduction in fundamental parameters such as the spread and the interest rate;
- the desire to perhaps extend the duration of the repayment plan in order to make the monthly installment to be paid to the provider more light and therefore more sustainable;
- the desire to change the rate, perhaps taking it from fixed to variable or vice versa, precisely in order to intercept the evident change in market conditions.
Finally, the renegotiation will lead to the drafting of a new contract which will take account of the needs envisaged by the user.
To adhere to the proposed change, the bank (or the financial company) in turn requests that the existence of elements such as to alter the relationship that was originally established is proved, making it in fact difficult for the customer to support.
How does mortgage renegotiation work?
The renegotiation of the mortgage provides for a fairly simple procedural process, which will end with the launch of a private agreement, which assumes the official form of a new agreement between the parties that originally signed the contract.
It should also be stressed that the request to activate the procedure ultimately represents a real formality. In fact, it is sufficient to send a registered return ticket to the provider in which the parts of the contract to be discussed will be indicated.
At this point it is necessary to specify forcefully how an institution of this kind presupposes an agreement between the parties, since none of the signatories of the original agreement can proceed to a unilateral redefinition of the conditions envisaged by it.
In this regard, it should also be remembered that in fact the lending institution is usually not very oriented to adhere to a proposal for renegotiation of the mortgage.
A typical case in which it has to face a bad game is the suspension of the payment of the installments by the contractor. In such an eventuality a new agreement can be said to be part of the natural order of things. It can also take place through extensions of payments, which allow the borrower to catch up with the payments.
Better renegotiation or replacement?
Very often there is a tendency to confuse renegotiation with the replacement of the mortgage. It should therefore be stressed that it is absolutely not the same thing: if in the case of renegotiation there are no additional costs, the replacement of the loan with a new one stipulated with another banking institution entails a series of costs related to its activation, for example the expenses for the preliminary investigation, the appraisal, the cancellation of the old mortgage and the launch of the new one.
Furthermore, if you intend to proceed with the scrapping of the mortgage and replace it with a new one, the sum can also be discussed and integrated again, based on renewed needs.
There is also an additional possibility, the one proposed by the subrogation, namely the replacement of the old mortgage with one turned on for the remaining sum with a second bank.
In this case, in fact, you can check better conditions and it does not become necessary to cancel the old mortgage and prepare a new one, with the cost savings that can ensue. In this case, however, you cannot ask for additional liquidity. According to experts, the surrogate is currently the most convenient solution, so much so that it is widely practiced by our compatriots.
What are the advantages of the mortgage renegotiation?
From what has been said so far, it is easy to understand how to renegotiate one’s mortgage has considerable advantages in the event of the need to propose it to the counterparty. Thanks to it, in fact, it is possible to obtain new conditions capable of meeting not only the market conditions, but also the supervening needs of the borrower himself. Among the main advantages, it should be remembered:
- the failure to pay off the loan, which would require the payment of new expenses, including that relating to the activation of the notary;
- the maintenance of the tax bonuses that had been obtained upon the signing of the first contract;
- the lack of additional expenses or taxes such as to weigh on the new agreement.
Mortgage renegotiation: advances 2019
Considering how the situation of the financial markets is constantly evolving, our advice is certainly to follow events with some attention. In particular, during 2019, the situation could change quite pronouncedly.
This change could be caused in particular by the planned end of Government Agency, or the support of the Medium Centrum Bank to the public debt of the dollarzone countries. In practice it is a program for the purchase of sovereign bonds and the sale of money to banks, with the specific task of supporting the so-called real economy (families and businesses).
Precisely the presence of Government Agency has allowed the dollarzone to enjoy extremely low interest rates over the past few years, a condition that has had a significant impact on financial products, starting with mortgages.
It is therefore advisable to monitor carefully what could happen in December, the month in which the program should expire. According to insiders, interest rates could rise, which would put a strain on the contracts signed, perhaps thinking that they would remain at very low levels for many years.
The new situation could in particular push many borrowers to reconsider the contract signed with the bank, perhaps going from a variable rate to a fixed rate or vice versa. In order to avoid that a renegotiation of this kind translates into damage, it is therefore necessary to try to better understand the possible developments of the economy over the next few years.