The bank or credit institution that will take over the purchase of a home loan will need the borrower to provide collateral. For a homeowner the most obvious guarantee is a mortgage on his property. Thus, if a problem of settlement of monthly payments were to arise, the lending institution will be able to recover the debts by seizing the property for resale. However, this approach involves fees that are more or less important but that it is also possible to negotiate so that they are limited.
The nature of the charges related to the mortgage of the repurchase of credit
To guarantee the repurchase of credit by a mortgage the opening costs are unavoidable. Often high, they are generally not negotiable. They amount mostly to 1.5% (or 2%) of the amount borrowed, which equates for example to a sum of 3,000 euros for a mortgage of 200,000 euros.
The costs of delisting the mortgage are negotiable. These apply when the mortgage is released, when the mortgage is repaid at the time of redemption by another organization. They can be reduced or eliminated depending on the negotiation. The charge for release generally amounts to 0.75% of the original amount of the loan. The release occurs automatically and free of charge 2 years after the end of the loan and when the property has not been sold.
The subrogation of the mortgage on the house or on the apartment takes place during the transfer. This is a first mortgage. It supposes that a first real estate loan was subscribed and that when the latter was bought back the borrower provided a financial guarantee. He can then transfer the mortgage from one institution to another. This is where savings can be made. First, the costs of cancellation (release) are not applied, secondly, it is up to the borrower to bear only the costs related to the constitution of the second mortgage.
However, be aware of the additional costs because subrogation must obligatorily take place before a notary. The mortgage is therefore associated with a notarial deed deposited in the mortgage custody of the municipality where the property is located. Another problem that borrowers may encounter, the bank where the original home loan was subscribed is often very reluctant to this type of operation.
On the other hand it will be necessary to provide for the costs of drafting authentic deeds by the notary, as well as the costs of advertising and registration in the mortgage office. The land registration tax generally represents 0.715% of the loan amount granted.
The mortgage transfer
When it comes to buying a property, a house of your dreams or a city apartment, the majority of future homeowners apply for a home loan for financing. Banks and lending institutions then demand collateral against the risks, which result in either a bond or a mortgage.
This must be provided by the borrower and requires the intervention of a notary, who will register the property to the Land Registry. The mortgage is then valid for a maximum of 50 years and ends as soon as the sum borrowed is paid in full to the creditor. When there is a change of circumstances and the borrower decides to sell his property to acquire another one, or in the event of a repurchase of credit which entails a change of creditor, it is possible to carry out a transfer of mortgage.
When there is transfer of property between the one that serves as collateral and the one that will be purchased, the mortgage guarantee is maintained. The conditions are that the transfer must be done by a notary, the borrower must have the agreement of the lending institution and can not change it. Thus, the costs of release as well as the opening of a new mortgage are avoided.
In case of credit redemption, which is an operation that allows to pay the initial home loan to buy another with better conditions (a better repayment in the long term, a more interesting rate and reduced monthly payments), things are a little different. When it is done in the same bank, it is a renegotiation and the operation is carried out very simply. If another financial institution deals with buying back the initial loan to set up a new one, the mortgage guarantee must be lifted and another one must be done, always with a notary.
It should be noted that the taking of mortgage is almost systematic when a credit redemption, especially when the amount granted under the credit exceeds a certain amount. The owner of the property (principal residence and / or secondary residence) then gives a security guarantee to guarantee the redemption or the regrouping of its credits.
Owning a real estate asset makes it possible to benefit from a mortgage loan or a mortgage purchase. The amount that will be allowed to borrow will depend on the value of the property being mortgaged. Although the mortgage serves as a guarantee, it does not interfere with the right to property, which means that the property can be used for personal use or sold or rented.
Thanks to the mortgage, the lending institution has the right to sell the property at judicial auction. It is in fact a guarantee against the non-repayment of the credit granted. This is considered classic for real estate purchases but not only. As soon as a borrower has a property he can put it in mortgage for a bank loan. In this case, we are talking about a mortgage loan that can be used to finance several types of debts:
- Tax debts
- Payment of inheritance tax
- The rebate (repurchase of the part belonging to one of the members of the couple in the event of divorce)
- The renovation of the housing
- Buying consumer goods
- Payment of a bank guarantee
- The bridge loan pending the sale of a property
The amount of the loan granted will depend on the value of the real estate secured by the mortgage. It can reach 65% for a loan term ranging from 8 to 30 years, with a fixed or variable rate.
One of the advantages of this type of credit is to be able to collect a mortgage and one or more consumer credit. The operation is interesting because the rates are more advantageous and the monthly payments are refunded over a longer period. In summary, to finance a new project, rather than lose a real estate, better to take advantage of the credit market is still very favorable. Mortgage allows the purpose to stay owner by obtaining funds on the value of the property. Especially that it increases as a rule over time.
Banks are not always able to set up a mortgage repurchase operation because it requires a very personalized service. That is why using a broker specialized in this type of transaction is strongly recommended. He will know how to find the best rate while accompanying the borrower during the appraisal of his property, as well as the notarial procedures concerning the mortgage. Finally, thanks to a professional negotiation capacity it will be able to lower mortgage fees.