The repurchase of mortgage credit, exclusively intended for the borrowers owners of real estates, is a solution to regroup several credits and / or to reduce the monthly payments thanks to a lower interest rate or to an extension of duration of repayment. S pecialized in personal loans and the grouping of fixed rate loans between individuals, supports you to help you understand the challenges of such an operation.
Replace the mortgage
There are two ways to buy back credit with a mortgage. A bank or credit institution can:
- either replace the mortgage loan;
- or make a grouping of credits with collateralization by mortgage.
The first situation is for borrowers who have taken out a mortgage. They previously mortgaged one or more real estate to take out a new loan and develop their assets. In this case, the repurchase of mortgage credit will simply replace the existing mortgage credit. In the event of financial difficulties, the bank will spread this new credit over a longer period, which will have the effect of reducing the monthly payments to be reimbursed each month.
Borrowers may also naturally want to take advantage of more attractive interest rates. Instead of renegotiating their loan, they can have it repurchased from the bank. The assets initially mortgaged remain as collateral for the newly granted loan.
The repurchase of mortgage credit thus differs from the grouping of real estate loans by the simple fact that a real estate is brought as collateral. The mortgage may concern both real estate already belonging to the borrower and the real estate for which the bank grants the loan. When he buys back his mortgage, the borrower also has the possibility of pledging not one, but several properties.
Consolidate credits with a mortgage
A mortgage loan repurchase can also aim to combine several credits with the mortgage concession on the property owned by the borrower. When the borrower has taken out a mortgage for the purchase of his main residence and a car loan, for example, he may have an interest in combining them. A single credit is then made with a single bank or a single credit institution.
But the organization in question can ask for a guarantee. In addition to having recourse to a family guarantor or a guarantee organization, the borrower can mortgage his residence in order to be granted a new loan allowing him to balance his budget.
Compared to the grouping of consumer loans, the repurchase of mortgage credit makes it possible, logically, to group together a much larger amount. It is for this reason that the bank brought to buy back the credits will guarantee the operation.
Note: what types of loans are affected by the repurchase of mortgage credit?
In addition to his or her home loan (s), the borrower can redeem almost all of his consumer loans, such as restricted credit, personal loan, revolving credit, life loan or bank overdraft.
How exactly does a mortgage buy-back take place?
A preliminary study will be carried out by the bank to determine the feasibility of the operation. This will be done in three stages:
- Estimate of the amount of credits to be bought back and of the additional cash possibly requested;
- Assessment of the borrower’s financial situation (income, charges, possible contribution, etc.);
- Assessment of the value of the property (s).
The value of the property must obviously be sufficient to cover the loans to be bought back and, if necessary, the new loan backed by the grouping.
If in view of all these data, the bank considers the mortgage buyback operation feasible, place the next step: defining the rate that will be applied to the loan. This rate will be based on several criteria, such as the duration of repayment, the total amount of the loan or the amount of the contribution. To recap, the rate observed on credit buyout offers is none other than the APR (annual percentage rate). The reason is simple: this rate includes all costs related to credit, such as the nominal rate and administration fees.