Mortgage interest rates are still low and have been for several consecutive years already. It may be interesting for a borrower who has taken out a home loan to buy his home a few years ago, to renegotiate or buy it back. The two operations are indeed two different actions. In the first case, it is a question of contacting the bank which granted the credit to try to convince it to review the interest rate of this one to the fall. If she refuses, the borrower has the opportunity to turn to another lender, who will then take care of buying the mortgage. It may offer better conditions in addition to a more interesting interest rate.
The definition of the repurchase of mortgage
The real estate market observers are all unanimous, interest rates are not ready to go up. This means that they will remain stable for several months, in short the moment is always ideal to go to see a financial institution competitor and offer him to take care of the purchase of his mortgage. According to his borrower profile, the bank will be more conciliatory and grant better conditions, but when the profile is considered average, the situation is more complicated and not everyone succeeds to win. The repurchase of real estate credit concerns this category of borrowers who failed to convince his initial bank to grant him better terms for his current mortgage, thanks to the signing of an amendment. They will have no choice but to look elsewhere, and even if the operation usually costs more than a renegotiation, it can be worthwhile provided it is well prepared and done correctly.
The principle of repurchase of mortgage is very simple. This is to find a bank that supports the balance of the current mortgage, by granting a new loan with a new contract. This is an opportunity to enjoy better conditions, with a lower interest rate, which can save money, even if in some cases the repayment period is longer. Note that this is not always the case and that it can also decrease depending on the situation. Various parameters will thus interfere in the financial arrangement, for example, the capital remaining due, but also the credit duration and the interest rate reviewed.
The conditions for a successful real estate loan
If a real estate buyback transaction includes fees, this is not the only thing to consider before embarking on such a move. Before any request, it is important to check some key points, which will help to think about the profitability of the buyout. The first thing to consider is the remaining life of the mortgage. This must necessarily be higher than the repayment period already passed. Moreover, it is important to note that mortgages with a relatively long life are the most likely to be redeemed. This is because it is in the early years that the majority of interest is paid. Another very important condition is that the remaining capital must not be less than 50,000 euros, and finally that the difference between the initial credit rate and the new loan is at least 0.5 or even 1 point.
Several fees are to be expected during the operation of a mortgage repurchase. These are warranty fees, insurance fees and prepayment fees. These are penalties, which are generally included in all loan agreements. They define the amount to be paid by the borrower when repaying his loan before the last due date. They are capped by law at a maximum of 3% of the outstanding capital and 6 months of interest. These fees can be added to the file fees and transfer or release, in the case where the property is put in mortgage. Any fees generated by the redemption may, however, be combined in the mortgage refinancing transaction and included in the total amount borrowed.
The real estate loan buyback transaction may also include consumer credit. However, these must not represent the majority of the capital to be repurchased, because the real estate portion must be 60% minimum so that the purchase remains in the category of mortgages. The borrower will then be able to collect all his debts in the refinancing operation, which will allow him to repay only one monthly payment covering all his previous deadlines.
In conclusion, for the redemption of mortgage credit is interesting, it is necessary that the gain on the total cost of the new credit subscribed, which includes the cost of the old credit and that of the new credit, is large enough to cover the whole of all costs related to the operation.
The benefits of buying real estate loans
The repurchase of mortgage allows to profit from a new rate of interest. This advantage coupled with a new repayment term redeveloped (ie shorter or longer) and the consolidation of all costs incurred in the operation can sometimes be synonymous with very substantial monthly payment reduction, that is to say, up to 50%. As a result, the household debt ratio drops considerably, which allows one side to find a financial serenity, but also a capacity for savings, on the other to be able to consider funding new projects.
When the repurchase of mortgage is considered to reduce the repayment term of the new loan, the new interest rate must be at least 1 point lower for the operation to be profitable. It should also be known that in this case, the monthly payment will be more important, so it will have to be adapted to the income of the borrower. When it comes to converting a variable rate into a fixed rate, the repurchase of mortgage is also a good way in this process. However, the monthly payments, although defined at the beginning by the fixed rate, can also be reviewed every year with the lender. This option has the advantage of being able to anticipate and plan household expenses.
Another important benefit of home equity repurchases is the borrower insurance that can be changed. The law now allows the borrower to subscribe to a borrower insurance with the organization of his choice, and in addition, to change every year, provided to find in the new contract the same conditions. This is a good way to save money by reducing loan insurance premiums.
The constitution of the repurchase of mortgage
The information requested for a repurchase transaction is the same as for the subscription of a credit, namely the civil status (identity document, family record book, marriage or divorce contract, proof of address), revenus (employee, retired, disabled, self-employed, etc.), the debt ratio (amortization tables for loans in progress, bank accounts, etc.), the rental situation, that is to say, the owner or tenant (rent receipts, title deed, etc.).
Making a free online simulation with no commitment is a good way to receive a first notice of feasibility of the repurchase of mortgage. Applying to a specialized financial institution makes it possible to have in front of you experts in repurchase of mortgage. They are able to understand the needs of the borrower and provide him with the most suitable loan offer.