The real estate loan redemption, is a solution during the loan. When the borrower repays his loan, several events can occur to aggravate his monthly expenses: birth of children, purchase of cars, loss of employment of the spouse, etc. This increase in charges, in addition to monthly loan payments, causes a serious budget problem for the person concerned. In order for the current loan to become profitable again, the necessary solution: the repurchase of mortgage loan. Renegotiation of a credit is also used when rates have fallen significantly. This opportunity is to seize to take advantage of the renegotiation of its credit. Thus, one can choose the duration of the new real estate credit with immediate consequence the monthly payment. In addition, the new negotiated rate will be more advantageous, so better rate, reduced monthly payment, reduction of the interest to pay, than to ask for more ..
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In order to better understand the definition of loan redemption, it is necessary to analyze this statement: ” a loan commits you and must be repaid.
First, check your repayment capabilities before committing yourself.
This mention therefore implies to consider the events that occur in the life of the borrower. No matter, happy event, or drama in the family, the loan must be repaid. The role of insurance helps in case of misfortune: death or loss of employment. On the other hand, events not covered by insurance occur at the birth of a child, for example. Add to that, breakdowns (cars, appliances etc.) that fall badly, when the budget is tense.
The repurchase of credit is a means to help the borrower to pay his debt by revising either the rate, the monthly payment and the duration of the credit. Loan redemption has several names: credit restructuring, credit consolidation, credit consolidation. Its objective remains the same: to reduce the monthly payments to allow the debtor to pay it appropriately. The differences are these:
- The terms of the loan repurchase are thus the fall in the amount of the monthly installment of the mortgage with, in return, the extension of its duration,
- Renegotiating the credit to get a lower loan if the market rate is down
- Consolidation of the home loan with other loans to obtain a fixed rate and a single term.
Usefulness and benefits of home loan buyback
Two answers are put forward for the question “why make a home loan buyout?
- The redemption of credit is a solution when the monthly payment becomes too heavy. The borrower has difficulty paying his debts when they accumulate with the arrival of new loans or when the monthly expense of the debtor increases as in the case of the increase of family expenses or the sudden increase of the cost of life
- Credit redemption is a solution to take advantage of interest rate cuts in the credit market. Indeed, it is possible to substitute the current credit by another with a more advantageous rate.
Thus, the repurchase of loan offers three major advantages. First, the pooling of credits allows the borrower to take care of a single debt. It has a global and well-defined vision of its debt, it will have only one interlocutor and will not forget the payment, repayment management is made easier. Moreover, in general, group credit enjoys a better rate. Renegotiation also lowers the current credit rate. It is advantageous if the expenses with the renegotiated loan are lower than the interest amount of the old one of the old loan. Finally, the repurchase of credit makes it possible to have a less expensive monthly payment by lengthening the duration of the credit. Thus, the monthly expenditure of the debtor is reduced. In short, the repurchase of credit facilitates repayment management and reduces the amount payable per month.
Techniques of negotiation of the loan purchase
A renegotiated loan must be a revised credit to the benefit of the borrower. As a result, the renegotiation takes into account some points. The renegotiation of a loan in the process of being repaid, in terms of duration and in terms of amount, is not advantageous and unnecessary. For this purpose, the outstanding capital must be significant, ie more than 50 000 €. The payment of the remaining debt with the new loan provisions must be more affordable than the provisions of the old credit and the difference between the old rate and the new rate applied for must be at least 1 point if the loan is in the first third of his repayment, and at least 2 points if he is in the second third of repayment. At a third of the end of repayment, the repurchase of credit will no longer be interesting. We must also think about haggling bargaining fees.
Procedures for the purchase of credit and documents to present
To submit credit to renegotiation, one must go through the steps of starting with two or more banks or lending institutions, including the owner of the claim, to see their offer. It is then necessary to make a simulation among the several offers and choose the most advantageous. The repurchase of credit with his own bank is the simplest, he only asks for the signature of the rider to the contract of the initial loan. However, for many reasons, the bank may refuse renegotiation. Another option is to buy back credit from another bank. The credit broker plays a vital role in the success of the home loan purchase because he can buy the loan himself and guarantee the borrower’s advantages thanks to his privileged relations with several banks. Indeed, the mortgage broker has the advantage of negotiating full funding all year so he has the good ears of bank advisers who make him offers much more interesting.