Are your repayments too high and your debts preventing you from effectively managing your budget? Buying real estate loan may be the solution for you.
The low level of rates leads many borrowers to question the interest of setting up a home loan buyout. This operation is profitable if it reduces the duration of borrowing or lower the monthly repayment. However, the situation is not the only factor to take into account in this practice. Explanations.
What is the repurchase of mortgage loan?
Credit redemption consists of pooling several pre-existing loans in one loan to reduce the amount of monthly repayments. This financing may concern all or part of the credits subscribed by the household. It is possible to include in this operation any bank overdraft or a loan intended to finance a new project (works, development, purchase of a vehicle …).
The law specifies that the term of repurchase of mortgage is used when the part of the mortgages to be bought back is greater or equal to 60% of the total of the sums to be bought back. Below 60%, we are talking about buying back consumer credit. Whatever its nature, the new global credit is subject to the same constraints as loans of the same nature and the rules of the annual percentage rate of charge (APR).
The operation of the mortgage repurchase
During a mortgage repurchase transaction, several loans are combined into one to lower the amount of monthly payments. The total duration of the new loan replaces the credits in progress. It is calculated on the borrower’s level of indebtedness and repayment capacity. The most interesting offer is that to enjoy the best rate possible.
In concrete terms, two situations are possible. Either the total cost of the new loan is lower than that of the old loans. This can happen if the current rates are lower than those originally negotiated. In this case, it is in the interest of the borrower to set up a home loan repurchase in order to benefit from a reduction in his monthly payments linked to an extension of the borrowing period and a competitive rate. Either the cost of the new credit is higher than that of the loans initially contracted, in which case the borrower will only benefit from the extension of the term of the loan and the decrease in the monthly payments that it causes.
How to apply for a mortgage repurchase?
Do you want to set up a real estate loan? Start by applying online for free and without commitment. You will need through a form to fill in some information about your situation and in particular the amount of your credits, your income, your family situation and your contact information. Once your request is received, a consultant will study the feasibility of your project. A positive response results in the start of the file instruction. The necessary supporting documents are then collected to transmit the request for definitive opinion. This opinion is delivered by an analytical service dedicated entirely to this mission. When all the conditions are fulfilled, the release of the funds takes place. The new lender repays the former creditor (s) by sending them a check or bank transfer. The repurchase of mortgage loan is effective from the following month.
Before applying for a mortgage repurchase, do not hesitate to make a free online simulation that will allow you to note the interest of such an operation and the amount of savings possible.
Redeeming real estate credit: the costs to be taken into account
The home loan buyout is not free. The related fees must be calculated before starting. Indeed, this operation amounts to repaying several loans in advance leading to the application of prepayment fees. These can reach 3% of the outstanding capital. Notary fees are also due in case of mortgage guarantee. Similarly, application fees are generally applied. To find out its borrowing conditions, the applicant can refer to his loan offer which must show all the expenses that may increase the cost of a credit redemption.
Finally, it is important to include in its calculation the amount of ancillary costs (possible additional cost of borrower insurance, rates charged by the new bank).
Should we go through the bank or broker?
Most borrowers ask for a home loan from their main bank or their spouse. However, in the context of a mortgage repurchase, it is advisable to put the institutions in competition. This operation can be set up at the bank of your choice. In this case, you will have to negotiate the real estate rate with the bank. You will then save the commission of the broker who gets paid directly from the banks or by charging a percentage of the credit amount.
Another option: go through a broker. Its role is to find you the most advantageous rate. Brokers have access to attractive offers because of the large number of files they present to banks. Their knowledge of the market and their experience will allow you to benefit from the best contracts.
Given the range of offers, it is sometimes difficult to make a choice. It is therefore advisable to use a broker to be sure not to make mistakes.
Thus, the repurchase of mortgage is a financial solution that allows the borrower to reduce his monthly payments and to have only one monthly payment to settle with a single interlocutor. It gives him the possibility of simplifying the management of his budget, reducing his overall debt ratio and benefiting from a cheaper real estate rate. The repurchase of credit must not be confused with the renegotiation of credit made with the same lending institution of origin.