You cannot afford to pay high monthly payments to pay back your housing loan? So it’s time to buy back your loan! By taking the trouble to do so, you will be entitled to a better interest rate. But beware, you must first make sure that you will actually win.
If you have one or more outstanding mortgages, you can decide to Home refinancing. Why? To benefit from more advantageous conditions than those obtained a few years ago at the time of the subscription of your contract. This can happen for example when current interest rates are historically low, unlike those of the time. On paper, this solution is rather interesting but see if it is in all cases.
What does it mean to buy back a loan?
In the hope of making savings, you can claim a repurchase of your mortgage. To do this, you have the choice between two options:
Opt for an internal Mortgage refinancing: you must ask your current bank for approval of a new credit clearing the old.
Opt for an external refinancing: it is a matter of finding a competing credit organization agreeing to repay the entire loan subscribed with your current bank.
During a redemption transaction, all the parameters can be reviewed in the new loan: duration of the loan, type of rate (fixed or variable) and choice of repayment method.
Clearly, taking out a new mortgage is the perfect opportunity to put all your expenses back on track and evaluate your situation in order to find the credit formula that suits you best. In this way, you will minimize your costs through lighter monthly payments and get financing for, why not, start renovations or make some purchases. Depending on your desire, you can also decide that the profit is translated rather by a shortened borrowing time.
An operation not always advantageous
In exchange for the benefit granted, the establishment may suggest the creation of a current account with domiciliation of salary as well as the conclusion of a fire insurance and insurance balance remaining due (ASRD). But these products will not necessarily be very cheap. So do not rush too quickly on a group sale and keep in mind that you can freely choose from which agency to conclude your contracts.
In addition, it is possible that the financial institution takes advantage of your request to take back some other debts related to your mortgage. This will have the advantage of facilitating the management of your budget since you will have only one contact.
To find out if a credit redemption is appropriate, perform online calculation simulations. Note also that such an operation is advisable when the loan is fairly recent – the repayment term must be at least 10 years – and you still repay a large part of interest.
If this is not the case, the costs of a redemption could be greater than the interest savings.
Also note that in general, it is estimated that the difference between the current rate and the target rate must be at least 1%.
The steps to follow to refinance your credit
Good news, it’s easy enough to redeem your credit through a bank. The first thing to do is to make an appointment with several financial institutions to communicate the characteristics of your current housing loan. They can then review your file. If you think this work is too time consuming, you can call on a mortgage broker whose mission is to find the best deal for you.
Of course, also talk to your own bank about your willingness to get a better deal. By showing her the benefits offered by other lenders, she might even suggest a renegotiation of your credit. Knowing that this operation costs less than a buyout, you could do a good deal.
In short, you have understood, the goal is to compete and push the different organizations to offer the most attractive conditions possible. This step of comparing offers to buy credit is important since it is only by studying all solutions that you will be assured of reducing your monthly payments.
High fees to take into account.
In the context of a mortgage purchase, you will have to bear various costs that could significantly affect your budget:
The replacement indemnity: the banking organizations require the payment of an indemnity during a prepayment of a credit in progress. This penalty usually amounts to three months of interest on the principal remaining to be repaid.
Release fees: the act of release is a notarial act by which the borrower terminates the mortgage on his property. The creditor must of course authorize it but this is generally the case since during a credit redemption, the customer owes him nothing. The notary will then ask the concerned parties to sign a document, of which he will give a copy to the Mortgage Office. Radiation costs between 500 and 700 euros.
The fees: calculated on the loan amount, they will be due to your (new) bank for the realization of the repurchase. Count between 200 and 300 euros negotiable.
Expert fees: they will be charged by an expert whose job will be to estimate the value of the property in its current state.
Registration fees: the new loan will require the new registration of the mortgage. The sum claimed for this purpose will be fixed according to the amount of the mortgage but it is often around 2 or 3,000 euros.
Before you redeem your credit, inquire about all rates claimed to know the total cost of the new loan. Only then can you know if it’s interesting or not.
What happens to your outstanding balance insurance?
If you Home refinancing your home loan with a new loan, you will need to have your outstanding balance insurance adjusted. Two situations can arise:
1. You had subscribed to an ASRD with your initial bank:
You stay with the same bank: all you need to do is update your contract.
You change banks: you can terminate your ASRD and enter into another with your new financial institution.
2. You had used an insurance company: you simply need to update your file.
Assuming that the purpose of a loan buyback is to take advantage of a lower interest rate, you may consider that the principal to be repaid will be smaller than before. As a result, the premium on your outstanding balance insurance will decrease.
You had opted at the time for a single premium and the news is more advantageous? You will then be reimbursed in principle for a portion of the premium paid.
If the Home refinancing leads to an increase in the amount to be repaid, the premium will also increase.
Attention: you will be older at the time of refinancing than at the conclusion of the initial ASRD. At the time of the revision of your contract, it is therefore possible that the insurer asks you to complete a medical questionnaire or to submit to an examination to assess any new risks. If it detects additional, it will increase the premium.
Conditions to still enjoy tax benefits
Since the sixth state reform, it is the regions that are responsible for the tax benefits associated with the mortgage loan.
In Wallonia, if you refinance your loan, you will continue to benefit from deductions for your original loan . No matter when the redemption occurs, it is the date of the deed of your first loan that counts to determine the reduction granted.
In Brussels, the principle of the housing bonus no longer exists since 1 st January 2017 but again, previous benefits are acquired as part of a new loan used to repay a loan that was deductible.