Month: November 2018

Loan Redemption: Conditions and Benefits

The loan buyback can be done as part of a loan consolidation in order to avoid over-indebtedness or as part of a mortgage buyback to get a better rate .

 Principle and purpose of the repurchase of loan

In both cases, it will be a matter of assessing the situation thoroughly to make the best decision.

Principle and purpose of the repurchase of loan

Theoretically, the redemption of loan, also called loan consolidation is a financial solution to overcome a significant debt situation. Its purpose is to reduce the overall amount of monthly payments . However, in order to reduce this amount, the total repayment term will be lengthened and therefore the amount of interest payable will be increased .

This solution must be considered with real caution and it is adopted only in rare cases. Indeed, its main problem is that it pushes the burden of repayments over time.

Although it simplifies repayment, since it includes several monthly payments in one, the lengthening of a loan necessarily leads to an increase in the overall costs . Indeed, the longer a loan is, the greater the total cost to be repaid.

What are the conditions to fulfill?

The conditions to be able to subscribe to a repurchase of loan other than a mortgage repurchase are not clearly defined, but rather evaluated on a case by case basis . There are, however, some constants that may give some idea about the possibility of accepting the file or not.

Among these, we find for example the fact that the applicant can not be prohibited banking , or that the subject of the request must concern a strictly personal or mixed reimbursement (private and professional).

A special case: mortgage repurchase

After the significant drop in mortgage interest rates, many homeowners have considered buying back their mortgage. The goal is to revise the initial loan rate and have the loan “repurchase” by a financial institution, in order to replace it with a mortgage on better terms .

In order for this transaction to have a real impact on your portfolio, we consider that you need a minimum difference of 1% between your current rate and the new application rate.

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