The redemption of credits including a mortgage is a common operation that allows to group several loans. The advantage of this type of operation is that the household will be able to subscribe to a single credit, which allows them to better manage their personal finances. In addition, he can adapt the conditions of the latter to his situation, that is to say a monthly adjusted according to his income and a repayment period that corresponds to his abilities. To find the best credit buy offer, the borrower will be able to turn to the many online comparison tools. Free and without commitment, these are excellent indicators allowing in a few moments to get an idea of the future monthly payment and the possibilities available to the request. Still, it is important to know how to use them and especially to take care of certain very important points.
Since October 1, 2016, offers credit issued by online simulators are required to display the APR, not the TEG as before. Just to remind you, the TEG indicates the nominal rate (interest rate) of the credit, while the APR is the indicator of the total costs of it, namely, the interest rate but also the costs of the credit. insurance, file and warranty. The objective of this change introduced by a European directive, allows the borrower to compare several formulas much more easily, whether fixed rate mortgages, like variable rate loans.
This means that when the borrower has two credit surrender offers in front of them, he will not necessarily have to focus on the interest rate, even if he is the comparator on which everyone tends to linger. Indeed, the total cost of credit being indicated in the APRC, it is to him that all the attention must be focused to choose the best offer. On the other hand, the current context of credit on the property market with particularly low rates, passed the second rank of the comparison. The first place is in fact borrower insurance, which can in some cases represent a very important part (up to 30%) of the total cost of credit. And it is precisely she who will make the difference in the proposals received. Depending on whether the borrower insurance is subscribed in a personal way in a bank or rather by a group contract, its amount can vary from single to double depending on the profile of the borrower.
Other elements to take into account when comparing offers, it is for example to postpone the payment of monthly payments (this is particularly practical in case of accident of life or hardship) or even the modulate for another amount at a given time. The standardized information sheet given to the borrower at the same time as the offer, is a good way to have an overview of all the different elements of the credit offered to him. Thanks to the APR the borrower can more easily make the difference and especially compare the conditions of the offer by varying the duration and the borrowed capital.
The different costs to take into account
When the purchase of credits includes a mortgage, we must be careful about all the costs that this transaction may entail. These vary according to the total amount to be repurchased and the nature of the transaction. Some of these fees are directly included in the funding as they are mandatory. On the other hand, others are optional, but in any case, all of them must be included in the evaluation of the operation.
In addition to the interest rate, which is the remuneration part of the bank or credit institution granting the loan, the following fees are to be expected:
- Early repayment benefits
- Warranty fees
- The borrower insurance
- Broker commissions, if borrowed, also called brokerage fees
Prepayment Allowance (ARI) is generally provided for in any loan agreement. The body that repurchases the loans in progress must, at the time of the sale, have to pay these expenses. They are capped at 3% of the outstanding capital, and 6 months of interest on the capital remaining due to the average rate of the credit when it is a repurchase of mortgage. When the consolidation of loans includes a majority of consumer loans plus a home loan, the rules are different. No IRA can be claimed for a credit subscribed before 1 May 2011, either for a revolving credit. Otherwise, for more than 10,000 euros redeemed early over a rolling 12-month period, IRAs will be 1% of the principal repaid for a period of more than 12 months of remaining repayment and 0.5% for less than 12 months.
The application fees, for example, which are requested by the banks are often not included in the financing, they must be paid cash and represent a few hundred euros (varying between 1 and 7% of the amount bought back). They can be negotiated depending on the case and the quality of the file, or even deleted if the borrower accepts for example to domicile his income in the bank. When a redemption file is refused, no fee can be claimed by the organization in charge.
Use a broker buyback credit, intermediary bank that will be in charge of all the administrative part of the file but also the negotiation of credit conditions at a cost. This is in the form of commission in percentage (between 1% and 5%) of the amount of the new loan. In some cases the broker is paid only by the financial institution that manages the redemption of credits.
The guarantee fees may correspond to the costs of setting up a mortgage on the property, or a deposit fee. They come in the form of notary fees and can be integrated into the total amount borrowed. The mortgage fees are around 2% of the loan amount on average, to which must be added the land registration fees (up to 0.715%). Guaranty fees are void when it comes to a third person and cost 2-3% of the amount borrowed when resorting to a surety.
An initiative that deserves reflection
Venturing into a credit redemption operation including a mortgage is not to be taken lightly. The advantage of this type of banking transaction is primarily to consolidate all monthly payments into one and to reduce the amount to find a financial comfort. If possible, the goal is to lower the total cost of credit, so comparing all parameters and fees is so important.
Many specialized organizations and banks offer bundling offers and to make the right choice, you have to be attentive to certain criteria. Appointment to a mandated institution, that is, intermediary in bank operations is a guarantee for the borrower. It is then necessary to check whether the operation is profitable by comparing all the costs, both those of the repayment of the remaining capital and the total cost of the repurchase.