Note these numbers: 2% and 35%. These are alarm signals if you have housing benefit

 Note these numbers: 2% and 35%.  These are alarm signals if you have housing benefit

Protection against rising interest rates is possible. The first step is to talk to the bank. Discover expert advice

Improving loan conditions at the bank, using some savings to get an early loan discount, or switching to a fixed rate are some of the protection options for those with a home loan.

For Nuno Rico, financial specialist at Deco Proteste, there are two warning signs to watch out for: if the Euribor rate is higher than 2% or if the monthly amount weighs more than 35% on the family income, then it is time to take action. to take.

In these cases, one should “check the financing conditions and try to improve them, namely by renegotiating the spread or possibly extending the term,” explains the specialist.

And in a situation where there are difficulties in meeting the payment of installments, the debtor must go to the bank “and try to find a solution to avoid default”.

An opinion shared by economist Vinay Pranjivan, who argues that with the rise in Euribor rates, the best option is to talk to the bank and ask for simulations about what will happen to the provision of your credit.

Faced with the result, the same specialist explains, the debtor must try to understand whether he can meet the new term, even if he has to adjust his family budget and reduce non-essential expenses. “If you do the math and the debtor realizes that it will not be easy to deal with the new term, he should tell the bank so that the bank can come up with solutions,” he emphasizes.

Extend term or renegotiate spread

And one of the possible solutions is to extend the loan term or renegotiate the spread, the margin that the bank charges.

In a loan of 150 thousand euros, for 30 years, indexed to Euribor for six months and with a spread of 1%, each of the solutions can be a good opportunity to reduce the monthly bill.

This credit currently leads to a monthly amount of just over 454 euros, but if the spread were reduced to, for example, 0.75%, the installment amount would rise to approximately 438 euros, a decrease of more than 16 euros per month.

spread reduction

150 thousand euros, 30 years, spread 1%, Euribor 6 months

Savings

installment

454.27

With spread 0.75%

437.88

16.39

With a spread of 0.5%

421.89

32.38

Another possible option is to extend the term of the loan, which, if accepted by the bank, would also allow for a reduction in the term.

For the same loan, an extension of the term to, for example, 40 years would save more than 100 euros.

Deadline extension

150 thousand euros, 30 years, Euribor 6 months

Savings

installment

454.27

Duration 35 years

394.91

59.36

Duration 40 years

350.43

103.84

Early Depreciation

Another option is to repay the loan early with families who have managed to build up savings.

Using savings for the full or partial repayment of the credit can be an advantageous option, as the profitability obtained from the application of this amount in low-risk savings products will hardly exceed the interest rate charged on the credit”, explains Nuno Rico.

With this option, in addition to “being able to save on the total cost of interest”, this specialist continues to allow “to obtain other savings in terms of life insurance premiums linked to credit”.

Vinay Pranjivan also states that this possibility should be considered as long as the return on savings is lower than the interest on credit. The expert also warns that savings should not be taken as an emergency fund set up by families for unexpected expenses, if so, the emergency fund should be maintained.

The discount for part of the credit may be subject to a penalty, but this may not exceed 0.5% of the discount.

With the same loan of 150 thousand euros, the advance deduction of, for example, 30 thousand euros would lead to a reduction in the monthly amount of about 90 euros. The fine would be 150 euros, so in the second month of payment of the new installment, the savings would already be greater than the fine amount.

Early Depreciation

150 thousand euros, 30 years, Euribor 6 months

installment

454.27

new episode

single punishment

Savings

Depreciation of 10 thousand euros

423.98

50

30.29

Depreciation of 20 thousand euros

393.7

100

60.57

Depreciation of 30 thousand euros

363.41

150

90.86

Fixed rate could be a solution

Another solution mentioned is the switch to a fixed-interest credit.

For economist Vinay Pranjivan, this is also a solution to consider, but more for the comfort of the debtor, who is not concerned about constantly evaluating his payment.

In financial terms, the economist recalls that the fixed-rate solution has historically led to higher charges and that early repayments in these cases have higher penalties, which can be as high as 2%.

An opinion shared by the DECO PROTESTE specialist: “this rate is generally higher than the variable alternative and in the case of existing offers in the national market, for longer terms, the difference is still significant,” emphasizes Nuno Rico.

Yet the same expert concludes: “If the consumer is unable to undertake the periodic reviews of the installment value of his credit agreement, the fixed rate may be an option, knowing that, at least in an initial phase, he will inevitably have more than if you had a variable rate contract.”

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