The repurchase of mortgage is a relevant approach to lower the overall cost of its bank loan, or to review the amount of its loan maturities downwards by benefiting from a new more attractive rate.
But in return, the new bank which proceeds to the repurchase of mortgage loan will protect itself from possible risks. She can then offer you the mortgage. What does it consist of and how much does it cost?
Reminder: definition of the real estate mortgage
In legal terms, the real estate mortgage is a security provided on immovable property affected by debt. It confers on the creditor a preferential right and a resale right on the property priced as security.
In simpler terms, this means that the mortgage is a means of protection for the bank in the event of default by the borrower. The latter can therefore take back the property to pay itself if you do not pay your loan deadlines despite the reminders that are made to you.
Taking out a real estate mortgage is chargeable for the borrower and is subject to registration at the mortgage office. In the event of resale of the property before term, that is to say before the end of the mortgage, the borrower must proceed to a release of mortgage, also paying.
What is the repurchase of mortgage mortgage?
The mortgage repurchase is similar to a loan renegotiation. The only difference is that the borrower leaves his current banking establishment to take out a mortgage at a preferential rate in a new bank.
The new bank will therefore settle the existing mortgage to create a new one over the desired duration, which will be used to pay the outstanding capital. The financial institution can therefore demand a mortgage on the property.
The taking of mortgage on real estate, or mortgage guarantee, is a valuable guarantee for the bank which proceeds to the repurchase of mortgage. As the value of the stone does not drop quickly, the bank is certain that it will not incur financial losses if you were to be a bad payer.
In this sense, if your mortgage repurchase is complex, either because your debt ratio exceeds 33%, or because the bank considers that your income lacks stability or regularity, the mortgage can help you access the loan. repurchase of credit by offering a solid guarantee to the future banking establishment.
Most of the time, it is still preferable for the borrower to go through other types of guarantee, less expensive and less risky for him, such as a bank guarantee. Nevertheless, the repurchase of mortgage loan is sometimes the best solution for the individual who wishes to keep his property and reduce his monthly payments in order to avoid situations of over-indebtedness.
In addition to the risk of seeing your house or apartment taken over by the bank, seized and put up for auction, mortgage repurchase can especially be complicated and expensive to implement.
Indeed, it supposes to proceed upstream to an evaluation of the property, especially if it is old or in an area with high loss experience (due to the geographic location of the property). This makes it possible to verify the feasibility of the operation in relation to the amount of loan granted by the bank.
But that’s not all, the mortgage guarantee requires the establishment of a notarial deed at the expense of the borrower, while a mortgage repurchase with surety does not require a new visit to the notary.
How much does a mortgage loan buyback cost?
Buying a mortgage with a mortgage is more expensive than buying a mortgage without a mortgage, but it is still reasonable since current interest rates are undeniably low.
As a borrower, the only fees you will have to pay in addition are those related to the mortgage guarantee with the notary. It takes about 2 to 3% of the loan amount. The lower the amount remaining to be repaid, the higher the mortgage is proportionately.
In all cases, whether you redeem your mortgage with a mortgage, a lender’s lien or a bank guarantee, the total amount of the operation will be brought to your attention thanks to the APR (Annualized Global Effective Rate).
The APR or the overall cost of credit must be looked at carefully before proceeding with a mortgage repurchase. These are two essential indicators so that you can easily compare the different offers offered by banking establishments.