2016 saw another dramatic drop in borrowing rates. A record drop of almost 1 point on mortgage loans, which went on average from 2.50% on January 1, 2016 to 1.50% a year later.
Despite the slight increase in recent weeks, the start of 2017 promises to be a particularly favorable period to take advantage of the advantages of loan repurchase. How to go about making a successful loan buyout in 2017? Here are some good practices to follow.
Why buy back credits in 2017?
A credit repurchase transaction can allow you to consolidate your serenity by reducing your budget. The principle consists in regrouping all your credits in a single restructuring loan on more advantageous conditions.
By this operation, you can reduce your monthly payments and/or the duration of your repayments, and globally reduce the cost of your financings by decreasing the amount of your interests.
In a credit consolidation, you have the possibility of including your real estate loans and consumer loans, but also other debts, such as late taxes or rents, and also personal or family debts.
A loan repurchase also allows you to embark on a new investment without unbalancing your budget, by including the necessary amount in your new restructuring loan. By reducing your monthly payments, you can also find new savings capacity if that is your goal.
The ideal conditions for carrying out a loan buyback operation
Several criteria must be met for your credit buy-back to be financially advantageous.
First, you need to have enough money to repay. If for example, you have less than 5 years of reimbursement, this may not be interesting. Indeed, on a loan that is in its second half of repayment, the financial gain on interest will be lower, because it is first the interest that is repaid.
However, do not neglect the gains you can get on your loan insurance, which can also be very substantial. Generally, it is customary to say that the new interest rate must offer you a difference of at least 100 basis points (for example 1.50% instead of 2.50%).
Nevertheless, it is necessary to study your situation on a case-by-case basis, including all the parameters of the new financing. By buying back your loans, you will have fees to pay to your bank (prepayment fees). You must, therefore, verify that the gains generated by a buyout are greater than the cost of your end of the contract.
Prepare your file carefully
The lending institution which will carry out your loan buy-back must take the least possible risk. For this, he will study with great caution your application for redemption.
By calling on a credit broker, you will also benefit from their assistance in properly establishing your file. Many documents will be collected. The amortization table for your home loans and consumer loans, the copy of your loan contracts, the copy of your last tax notice, the copy of your employment contract, the copy of your last three payslips, are among the elements that you will have to present.
Likewise, you will also need to collect a copy of your last three bank statements, your family book, if applicable, your marriage contract, and certain banking establishments will sometimes ask you for other documents to complete this file. It may sound boring, but these steps are necessary and the benefit you will derive from them far exceeds the efforts required.
You will be able to have very good surprises. In some cases, the conditions obtained will allow you to reduce by 2 or 3 times, the total amount of your monthly payments. Having only one loan to repay will also simplify your monthly budget management, adding to your peace of mind.