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Mortgage refinancing in France: reasons you should (& shouldn't)

Is remortgaging in France the right thing for you ?

With French mortgage rates dropping to all-time lows, now can seem to be the perfect time to remortgage. But before you start the process of looking for bank statements and pay slips, here are a few guidelines to help you assess whether it makes sense to remortgage.

1. remortgage if you can minimise your total cost of borrowing. Switching mortgage provider in France is not as smooth as it can be in other countries. In addition to the administrative burden, refinancing involves fixed and variable fees. All in all, notary fees, early repayment charges and admin fees will account for about 5% of the loan amount. It is therefore important to look beyond the difference between your new and existing rate. As a rule of thumb, remortgaging will make sense if and will save you money if:

- The rate you are currently on is 1% higher than the new rate you are offered
- You are closer to the beginning than the end of your existing loan
- Your outstanding balance is higher than €50,000
- Finally, because mortgage protection insurance will be required, evaluate the impact of any new pre-existing medical conditions that could affect the cost of your new insurance

But it can be worth it ! A borrower who took out a 20 year €200,000 mortgage in 2011 at 4% would save €9.182, net of fees, if he remortgaged on a 2.9% mortgage without increasing the term.

2. remortgage if you want to finance home improvement work or raise capital. If you have equity in your home or if it is unencumbered, it can be worth contemplating taking cash out in addition to re-mortgaging. Borrowing against your French property can be a very effective way to raise capital, finance renovation work, or repay more expensive debts either in France or in another country.

3. Remortgage to switch from a tracker or an interest only deal. A low rate environment can be a perfect time to move from a tracker to a long term fixed rate. Similarly, if you are on an interest only deal, it can be worth remortgaging to avoid early repayment fees and anticipate the amortization period.

In any case, an authorised mortgage broker will be able to assist you with exploring options and recommend a product suitable for your needs.

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