Repayments becoming difficult? This archive article looks at renegotiation and the provisions available in 2023.

At the time of writing, ECB President Christine Lagarde's comments about a further July rate rise concerned variable-rate borrowers, whose payments could increase significantly.

Renegotiation can be an option, normally requiring the lender's agreement. The article also discusses a specific temporary route under the 2023 Budget Law, which must be distinguished from ordinary voluntary renegotiation.

What does renegotiation involve?

How to renegotiate a mortgage

The borrower asks the existing lender to revise loan terms that have become burdensome.

Which terms can change?

Depending on agreement, changes may include switching between fixed and variable rates, the lending spread, the repayment term or repayment arrangements. More than one term may be changed together.

The revised terms determine a new payment schedule. Online calculators can provide an indication, but the lender's formal proposal is needed to establish the actual instalments and total cost.

Reasons include seeking better pricing, lower payments or more flexibility. A lower monthly payment does not necessarily mean a lower overall borrowing cost.

The 2023 renegotiation provisions

The 2023 Budget Law introduced a specific opportunity to convert qualifying variable-rate mortgages after substantial rate increases.

The article lists these conditions for that temporary route:

  • The mortgage was entered into before 1 January 2023.
  • The original loan did not exceed €200,000.
  • The loan was variable-rate throughout its term.
  • The borrower's ISEE did not exceed €35,000.
  • There were no overdue instalments.

Applications under that provision had to be submitted by 31 December 2023. That deadline is historical and is not open today.

The article also describes extending repayment by up to 5 years, provided the remaining term did not exceed 20 years, within the temporary scheme's conditions.

Possible costs

Does renegotiation involve costs?

The article cites article 120-quater(5) of the Consolidated Banking Act in discussing fee-free renegotiation arrangements. Ask the bank to confirm the proposed procedure and any applicable charges before accepting.

An agreed renegotiation may be documented by a private agreement signed by both parties, without a new notarised mortgage deed.

Timing and repeat requests

A borrower can request a review during the loan term, including soon after borrowing or after two or three years.

For ordinary voluntary renegotiation, the bank generally decides whether to accept. This should not be confused with any specific statutory entitlement that applied within a temporary scheme.

Repeat requests may be made, but a request alone does not oblige the lender to agree.

How to apply

Contact your bank, setting out the terms you wish to change and why. The original article suggests a registered letter with acknowledgement of receipt; ask the bank which formal application channel it uses.

Include documents supporting any change in your financial circumstances.

The article notes that renegotiation can also concern loans associated with tax relief or other benefits, subject to checking the consequences.

What if the bank refuses?

Renegotiation is not the only route to examine.

Alternatives may include mortgage portability or replacing the loan.

Portability transfers the outstanding mortgage to another lender under the applicable rules. Replacement involves a new loan with different terms and potentially different costs. Compare the overall outcome carefully.

SOURCE: WIKICASAnews