It is possible that you have taken out a mortgage for the acquisition of your property at a rate higher than that currently in force. It is therefore in this kind of situation that a loan buy-back can become interesting.
How it works?
Before launching into the repurchase of your mortgage, it is essential to determine if this operation will still be profitable for you even after the deduction of the financial costs annexed to this type of operation. In summary, the total cost of your loan must be attractive enough to be able to cover all costs relating to refinancing.
Thus, among the costs inherent in real estate loan repurchase operations, there are the indemnities in the event of early repayment, also called IRAs or penalties. This amount may certainly not exceed 3% of the capital remaining to be reimbursed, but they include the total of the six months of interest following the redemption request.
It is also relatively difficult to escape this type of fee except by having negotiated a cancellation of these fees in the event of redemption or reimbursement by your means, when you took out your loan from your banking establishment.
However, if the repurchase of your credit is carried out by our organization, it is impossible to cancel the IRA even in the case stated above.
In addition, you must also take into consideration the cost of the guarantee since you are taking out a new loan. The cost of this new warranty will vary depending on the current warranty you have.
If you have for example a mortgage or IPPD, the costs of raising hands will be your responsibility and a new guarantee will also have to be put in place.
In the case of a surety, for example with a Housing Credit, 0.75% of the mutual guarantee fund that you had paid when you first took out credit belongs to you. This will allow you to cover the costs of the new warranty.
Note also that you can renegotiate the rate of your credit with your current bank which can make an effort not to lose a customer! That said, it is likely that this negotiation will not lead you to take out other investments, insurance, etc. …
Even if in this case, you will not pay the IRA fees, handling fees and guarantee, your rate will certainly not be the lowest on the market. This is why the competing banks make you benefit from very attractive rates to have you as a new customer: this is what is called the “call offer”.
The procedure for buying back your mortgage
In order to save money while taking into account the market rates and fees mentioned above, it is essential to properly assess the costs and benefits of the mortgage buyback operation.
First, it is essential to take stock of the remaining amount you have to repay as well as the remaining term by consulting your schedule.
So, if you decide to keep the same duration for your new loan while reducing your monthly payments, several scenarios arise:
- If you are, for example, in the first third of repayment, a new mortgage with an interest rate with at least one point below the current one is necessary to make the operation profitable.
- If you are in the second third of repayment of your current loan, the new rate will have to be two points lower than the current one in order to be able to save money.
- Finally, if you are in the last third of your loan repayment phase, know that a credit repurchase will be totally uninteresting for you. This option can nevertheless be considered if your income has increased since the subscription of your loan and you can afford a shorter repayment period and less debt.
It is therefore essential to be attentive to the total cost of your loan as well as the costs of real estate refinancing so that your transaction is interesting.
To sum up, monthly payments are just as important as the total cost of your loan. In addition to the gross gain that this operation can bring you, you must deduct the various redemption fees such as for example bank domiciliation fees, penalties, guarantees and handling fees in order to obtain the real net gain.