The fall in interest rates is now lasting. For over a year now, borrowing rates have been falling steadily. This unprecedented situation is enough to please many. This is the right time to invest in cheaper stone. For those who do not have a real estate project to implement, this period can also prove fruitful. To benefit from discounted loan rates, you only need to have one or more outstanding mortgage loans. In this case, it is through the repurchase of home loans that borrowers will save money.
Understand the mechanism of credit redemption
The repurchase of credit encompasses two types of financial transactions. On the one hand, the purchase of loans is a financial restructuring solution for households whose debt load is too heavy. This procedure is a consolidation of loans. The main goal is then to reduce the household debt by simplifying the management of the family budget (one credit, one monthly payment) and extending the initial repayment term of the loans. This credit buyback solution is offered by specialized banking organizations. To gain access, it will be necessary to seek the services of a broker specializing in buyback loans.
On the other hand, the French are increasingly resorting to the redemption of real estate credit called renegotiation of real estate. In contrast to financial restructuring, the goal is to minimize the cost of initial credit. Given the interest rates that have fallen in recent months, this procedure has become very common in France. Borrowers who financed a real estate project before the rate cut can be refinanced by the competing banks at prevailing rates. The repurchase of mortgage gives rise to additional costs (refund penalties in the initial bank, mortgage guarantee fees).
The only constraint for individuals who wish to benefit is the need to change banks. Indeed, the bank that the project will undoubtedly require a commitment to domiciliation of income. This account transfer is now simplified by banking services that take care of the administrative formalities. Nevertheless, it is essential before contracting the purchase of credits, to ensure that the bank management fees are not too expensive.
Decrease in duration or monthly payments: How to make a choice?
The lowering of the interest rate of the contracted loan generates a decrease in the cost of the loan. This gain is far from negligible since it can represent several thousand euros. The amount depends on the weight of interest in the repayment. As time goes by, the share of interest paid by the borrower decreases. It is therefore more interesting to launch a credit redemption procedure during the first years of amortization.
The borrower then has the choice of impacting the reduction of the rate over the duration or directly on the monthly installment of credit. The first option is to amortize the loan faster, the second is an opportunity to reduce its monthly financial burden. The best choice is, first and foremost, the one that best suits the debtors’ priorities. It is true that the gain realized is more important in the context of a decrease in the duration.
The reduction of the monthly payment is nevertheless a solution not to be neglected. Indeed, this possibility is distinguished since it offers an immediate gain. In the month following the buyout, borrowers see their borrowing load lighten up. As a result, it is a way of anticipating a fall in the net income paid by the employer as early as 2018. Indeed, the move to the collection of income taxes at source will have an impact on the French budget.