My answer is: of course, conversion! Why? Because I am answering a question, and I feel that you did not understand the calculation method when you asked this question, so I will explain it more clearly (here are some practical information)
Interest rate: LPR + points
Points = Original contract execution interest rate level - December 2019 LPR
Previously, we were based on the basic interest rate. In the early years, we enjoyed interest rate discounts, such as 20% off, 10% off, etc.; in the past two years Many have experienced interest rate increases, such as increases by 10%, 20%, etc.
So, how does each person’s transformation proceed?
Case 1: The previous mortgage interest rate increased by 10%
Current interest rate: 4.9% × (1+10%) = 5.39%
December 2019 The LPR above 5 years released in March was 4.8%. If the borrower and the lender decide to switch the pricing basis on March 30, 2020, and the repricing cycle is still one year, and the repricing date is still January 1 of each year, then:
Added points: 5.39%-4.8 %=0.59%
Future interest rate: LPR+0.59%
Case 2: The previous mortgage interest rate was 10% off
Current interest rate: 4.9%×0.9 =4.41%
Add points: 4.41%-4.8%=-0.39%
Future interest rate: LPR-0.39%
Simple Sort out the changes in mortgage interest rates before and after, and check your own situation against your contract
In addition, the changes in LPR in the past few months are also relatively obvious, and they are basically in a downward trend.
Of particular concern is that lower long-term interest rates are a global trend. Some time ago, Zhou Xiaochuan also said that China has the ability to delay entering the era of negative interest rates. In other words, Zhou Xiaochuan believes that negative interest rates are inevitable in the future, but China has the ability to delay it.
Many regulators also stated at the recent press conference of the Joint Prevention and Control Mechanism of the State Council that prudent monetary policy must be more flexible and appropriate to provide strong monetary policy support for fighting the epidemic and supporting the real economy. The next step will be to continue to promote the reform of the loan market prime rate (LPR) and guide the overall market interest rate and loan interest rate to decline.
Therefore, it is not that if your 4.9 is consistent with the lpr at the end of last year, it will be over, but if you add points to fix it, the lpr itself will be lowered.
I personally recommend switching to LPR. (Personal prediction) In the future, the economic trend should be downward, and both deposit and loan interest rates will go down. If you don’t switch this time, your interest rate will be fixed, and the element of gambling will be greater. This article only represents my personal opinion and has nothing to do with Bank of Communications
As for the previously discounted or floating interest rates, it is actually equivalent to changing the original floating percentage into the current plus or minus percentage points. The discount has not occurred. A qualitative change, after adjusting the LPR, your actual interest rate will remain unchanged during this cycle
If you ask me for my opinion, I personally adjusted my loan as soon as possible. The interest rate will follow the market, which is more secure. , just fix a value now, and you will have to pay it back for more than 20 years. The risk is too great
Take me as an example. The loan that year was 15% off. Yesterday, my interest rate was 4.9% above the benchmark interest rate. 15% off, the landing rate is 4.165%. I switched to LPR. The LPR in December last year was 4.8%. Now the plus and minus points calculated for me are -63.5 basis points. The interest rate after landing is still 4.165%, unchanged. But this -63.5 basis point is fixed. On January 1 next year, no matter what the LPR is, I will subtract 0.635% from it
One basis point is 0.01%
The loan interest rate changes with the market. It will be determined on the day of disbursement whether you will have an increase or a discount. From now on, it will be based on the annual base interest rate, with the same increase or discount. Now changing the LPR means continuing to keep the loan float, but the calculation method has changed. If you don’t change it, your interest rate will no longer fluctuate in the future and will remain the same every year as it is today.
This LPR conversion only involves interest rates. As for the repayment method of equal amounts of principal or equal amounts of principal and interest, and whether the interest rate adjustment method is January 1st or annual adjustment, it does not fall within the scope of this adjustment. Continue as is.
As for the specific operation of adjusting LPR this time, please see the circle of friends I posted before
Some friends reported that they could not see the mortgage information in mobile banking. That is your mobile banking. It does not correspond to your mortgage customer number. It is easy to encounter when you have multiple savings cards under your name. The solution can be to re-register or associate with mobile banking with the mortgage repayment card, or go directly to the business outlet to ask the staff to assist with the association< /p>
If you firmly believe that the interest rate will rise in the future, you can choose not to adjust it and fix the current interest rate until the loan is paid off
In the past, loans were agreed to be repriced on January 1st every year. Therefore, your actual interest rate will not change until the end of the year after this adjustment. It will be re-determined with the LPR at that time on January 1 next year. After the adjustment, it will not change again next year
This month The LPR in December is 4.75%, and it was 4.8% in December. It is more beneficial to you to determine the addition and subtraction points based on the LPR in December. The advantage of repricing will be revealed on January 1st next year
About converting LPR interest rates problem, my suggestion is to replace it! Why do you say that? I will conduct a detailed analysis below! If you take a loan of RMB 1 million and a repayment period of 20 years, how much money can you save in one month?
1. The era of benchmark interest rates:
The way banks calculate mortgage interest rates is: benchmark interest rate + floating interest rate, the specific formula:
Loan interest rate = benchmark interest rate * (1 + floating interest rate)
The questioner gave two conditions: 4.9% as the base interest rate, equal principal repayment, and how much money can be saved every month. Is it cost-effective? Two conditions;
Let me add two assumptions here: the total loan amount is 1 million yuan, and it will be paid off in 20 years!
Calculation process:
Equal principal repayment: means that the borrower's monthly principal repayment remains unchanged, and the interest becomes less and less as the loan is repaid.
Calculation formula:
The first month’s repayment is 8,250 yuan. The repayment situation in the first year is as follows:
By the 20th year, the accumulated principal will be returned The deposit was RMB 1 million, and the accumulated interest repaid was RMB 492,000.
2. LPR era:
LPR interest rate: the full name is the loan base interest rate, which is one word different from the above base interest rate! It is generated by quotes from 18 banks based on national policies and market conditions. It is a new measure for the national interest rate marketization! Although LPR interest rates are quoted every month, for home buyers, they are adjusted annually.
Calculation formula: loan interest rate = LPR + points
The latest LPR quotation was generated on December 20, 2019, 4.8%,
2020 Your loan interest rate remains unchanged, still 4.9%, but you have to calculate an additional point number:
Additional points = 4.9%-4.8% = 0.1%, since the loan interest rate is adjusted once a year
The actual loan interest rate in 2021 = the latest Lpr + 0.1%, and the 0.1% increase will remain unchanged in the future!
If you enjoy a 10% discount interest rate, the calculation method is the same, and the additional point is negative 0.39%
Calculated based on the latest LPR interest rate in February 2020, 4.75% + 0.1% = 4.85% , calculated using the above formula: the repayment amount in the first month of the first year is 8208.33 yuan!
The monthly payment is 42 yuan less than the original interest rate of the first type.
It’s basically equivalent to the bank treating the questioner to a packed lunch for a day! This is only calculated based on the current LPR. As interest rates fall in the future, the subject can also have a better meal!
Then accumulated to 20 years, the interest rate is calculated based on the LPR in February 2020, and the total interest is 487,000 yuan!
So, should you choose a fixed interest rate or convert to LPR? How to choose?
No one can say what will happen in the future, but judging from domestic and foreign experiences:
First, when a country develops to a certain level, interest rates will also Gradually falling, such as in developed countries, interest rates are extremely low, some are close to 0, or even negative!
Second, the central bank clearly stated that it will resolutely implement the positioning of "houses are for living in, not for speculation"! Reducing the burden on the people and allowing them to have money for consumption is the direction of the policy!
Third, due to the impact of the epidemic, the Federal Reserve lowered its benchmark interest rate by 50 basis points on March 3, 2020, kicking off the interest rate cut!
Therefore, the current mainstream view in the market is to recommend converting to LPR interest rate! If interest rates rise in the future, you can still repay in advance! Enjoy the benefits first!
However, if you personally judge that interest rates will continue to rise in the future, you can also keep the fixed interest rate unchanged!
My answer is: of course, conversion! Why? Because I am answering a question, and I feel that you did not understand the calculation method when you asked this question, so I will explain it more clearly (here are some practical information)
Calculation method of LPR model
Interest rate ：LPR + points
Points = original contract execution interest rate level - December 2019 LPR
Actual case
Previously, we used the basic interest rate. In the early years, there were interest rate discounts, such as 20% off, 10% off, etc.; in the past two years, many interest rates have increased, such as 10%, 20%, etc.
So, how does each person’s transformation proceed?
Case 1: The previous mortgage interest rate increased by 10%
Current interest rate: 4.9% × (1+10%) = 5.39%
December 2019 The LPR above 5 years released in March was 4.8%. If the borrower and the lender decide to switch the pricing basis on March 30, 2020, and the repricing cycle is still one year, and the repricing date is still January 1 of each year, then:
Added points: 5.39%-4.8 %=0.59%
Future interest rate: LPR+0.59%
Case 2: The previous mortgage interest rate was 10% off
Current interest rate: 4.9%×0.9 =4.41%
Added points: 4.41%-4.8%=-0.39%
Future interest rate: LPR-0.39%
Briefly review the changes in mortgage interest rates before and after , check your own situation against your own contract
In addition, the changes in LPR in the past few months have also been relatively obvious, and they are basically in a downward state.
Of particular concern is that lower long-term interest rates are a global trend. Some time ago, Zhou Xiaochuan also said that China has the ability to delay entering the era of negative interest rates. In other words, Zhou Xiaochuan believes that negative interest rates are inevitable in the future, but China has the ability to delay it.
Many regulators also stated at the recent press conference of the Joint Prevention and Control Mechanism of the State Council that prudent monetary policy must be more flexible and appropriate to provide strong monetary policy support for fighting the epidemic and supporting the real economy. The next step will be to continue to promote the reform of the loan market prime rate (LPR) and guide the overall market interest rate and loan interest rate to decline.
So, it’s not that your 4.9 is the same as the lpr at the end of last year, but if you add points to fix it, the lpr itself will be lowered
I think it can be converted to LPR for the following reasons .
After the mortgage interest rate of 4.9% is converted to LPR, the interest rate at the time of conversion remains unchanged. Because the conversion uses the LPR interest rate in December 2019, which is 4.8%, your point value is 4.9%-4.8%=0.1%.
In other words, after you convert to LPR, the new interest rate becomes LPR+0.1%, and future interest rates will change with LPR every year.
The 4.9% mortgage interest rate should have been a few years since you bought the house, because the mortgage rates have been rising in the past year or two, and yours is still the base interest rate. When repaying the principal in equal installments, the initial repayment amount is larger, and the principal becomes less and less as the repayment time is reduced, which is faster than the principal of equal principal and interest payments. In the later stage, the repayment amount becomes smaller and smaller.
LPR is currently on a downward trend. Regardless of market conditions or policy factors, LPR interest rates are unlikely to rise in the past few years. Therefore, choosing LPR can reduce loan costs.
A little further, whether LPR is correcting or rising further, because the remaining principal is getting smaller and smaller, the impact on you will be smaller and smaller.
Taken together, the cost has been reduced in the past few years, and the LPR market in later years cannot be accurately judged for the time being. Even if the LPR rises, it will have little impact, so the overall risk of choosing LPR is not high.
Therefore, my suggestion is to choose the LPR interest rate.
Whether conversion is necessary or not depends on the change in interest rates over time. If you don't switch, the interest rate will always be 4.9% and you won't be able to change it again; if you change the interest rate to 4.9% + points, according to the current policy, even if you switch to LPR, it will still be 4.9%.
If you don’t replace it, the interest rate will increase in the future, which will be beneficial to the owner; but if the interest rate decreases in the future, it will be detrimental to the owner.
Therefore, whether the interest rate should be replaced by LPR requires a judgment on future interest rates. We can look at the interest rate trends in European and American countries as a reference
This is a chart of German interest rates. From the chart we can see that German mortgage interest rates are generally going downwards, and many European countries now implement negative interest rates. , mortgage interest rates should be lower in the past few years.
Next, let’s take a look at the U.S. mortgage interest rate trend chart
The U.S. mortgage interest rate trend chart shows that although there are fluctuations over time, the overall trend is downward.
Now let’s take a look at the trend of the central bank’s loan interest rates for more than five years. Home loans mainly refer to the interest rates for more than five years, so we use this for comparison.
We can see from the figure that from 1991 to 2018, the central bank’s loan interest rate for more than 5 years has been on a downward trend. Although there are fluctuations, the overall trend is downward. The epidemic has had a great impact on the economy, and central banks of various countries are releasing funds to rescue the economy, so the probability of raising interest rates in the short term is unlikely.
In summary, regardless of the developed economies in Europe or the United States, their mortgage interest rates are generally on a downward trend; then our central bank's interest rates for more than 5 years are also on a downward trend. With reference to the trends in Europe and the United States, combined with domestic conditions, my country's mortgage interest rates are likely to go downwards in the future. Personally, it is recommended to change to LPR, for reference only. Investment is risky, so be cautious when entering the market.
I personally think it is better for you to convert to LPR
1. You said that the equal principal interest rate is 4.9, so your loan should be several years old, because from last year to now Loan interest rates are on an upward trend.
2. LPR is currently on a downward trend. Regardless of market conditions or policy factors, LPR interest rates are unlikely to rise in the past few years. Therefore, choosing LPR can reduce loan costs.
3. After you convert to LPR, the new interest rate becomes LPR+0.1%, and future interest rates will change with LPR every year. Whether LPR is correcting or rising further, because the remaining principal is getting smaller and smaller, the impact on you will be smaller and smaller.