Credit financing in the context of debt restructuring allows the grouping of its receivables with the aim of having a single point of contact and a single credit. This has the advantage of offering a reduction in monthly payments and a longer repayment period. It also helps the borrower to lighten his finances. But the question that people who wish to take out a loan ask themselves is: up to how many months or years can the duration of a mortgage be extended and what are the criteria of the buying institutions to grant this extension of the duration? The answers in the following article
First of all, what is credit repurchase?
It is a term often heard in the finance and credit world. This financial operation can be illustrated in the following example. A person has accumulated several credits (revolving, consumer loan, construction loan, real estate credit). However, after two years of debt repayment, he enters a critical situation due to health accidents for example. He is struggling to repay his debts. In addition, the rest of his life is insufficient and his indebtedness is close to the ceiling of 33% of his income. In this case, the most recommended alternative for him is to buy back credit or to consolidate his debts. This operation makes it possible to reduce his monthly payments by readjusting his monthly payments in line with his financial situation. The number of repayments to be made each month decreases while the repayment period generally increases. This is done by substituting the few credits into a single credit with a credit rate that is generally lower than its previous financing contracts
There are three types of debt consolidation:
the restructuring of consumer debt, the purchase of real estate credit, and the consolidation of consumer credit with real estate credit. The first does not require a personal contribution and its repayment period is spread over 12 years. The second type of repurchase often requires a mortgage or a guarantee and the maximum repayment period is limited to 35 years. The repayment period is the same for the third category but the difference between these two types of repurchase is the amount that the borrower could ask for. It should be remembered that this financial operation does not necessarily have to involve all outstanding loans. The borrower has the right to set aside certain debts.
The extension of the duration of a real estate loan repurchase
As explained above, the interest of this repurchase operation consists of being able to consolidate its debts in order to lower its debt ratio and benefit from an extension of the repayment period. Borrowers often use this operation for revolving loans and consumer loans that have high-interest rates. However, it is also not uncommon for borrowers to seek to redeem their home loan taken out at a fairly high rate a few years ago. As soon as they find a more advantageous rate, they resort to this operation in order to have an important saving.
But during the subscription to his real estate credit also, a borrower could also modify the remaining duration of his repayment. Let’s take an example: a couple decided to buy a house worth 220,000 euros on credit. 220,000 on credit. The repayment scheduled at the beginning of the contract is spread over 20 years. They are now halfway through their repayment. In this case, they can either reduce the repayment period to 15 years or extend it by 5 or 10 years. The interest for each formula (extension or reduction) depends on the borrower’s financial situation
Extending the remaining term of the loan.
During the repayment of the real estate loan repurchase, the borrower’s financial situation may become more complicated. This could be due to divorce, death of a spouse, work stoppage, the arrival of a newborn child, change of income, etc. But his financial difficulties could also come from the rehabilitation of the housing or the work he has done on his property. In all these cases, extending the duration of his debt consolidation could help to clean up his budget without changing the total amount. This is especially possible if the current interest is lower than the interest on the old loan. But if they are significantly higher than the interest on his credit, the operation will be less advantageous.
The total cost of financing will increase. Here is another example to illustrate this:
a person has taken out a mortgage on a property.
over 18 years with a bank. 12 years are remaining at the time of renegotiation. He is having difficulty repaying his loan and is looking to buy it back. After research, a broker referred him to another bank that agreed to buy back the credit with a 2-year extension. The extension of the duration of a loan is therefore possible but the conditions differ according to the bank. These conditions are as follows:
the borrower cannot go beyond the duration of the initial loan. He should have a good profile and good bank scoring.
the extension is possible once a year but it is limited to a maximum of 3 years.
the borrower can make the first request for an extension of the mortgage after the second year of the anniversary date of the contract.
the reason for the extension must be justified: for example: to extend the loan to take out another loan for the construction of a garage or a veranda
the duration imposed by the banks between two redevelopments must be respected.
the rate of the new loan is not necessarily lower than the old one. It may even be that the buying institution offers a prohibitive rate.
And what about reducing the remaining term of the credit?
This choice applies to all those who have unexpected flexibility in their budget. They have for example an unexpected money resource such as an inheritance, a pm gain, etc. This allows them to renegotiate the duration of their debt by reducing the duration. This alternative
allows them to quickly settle their debt and make other projects. It has a positive impact on the total amount to be paid and the amount of interest to be paid. On the other hand, the monthly installments to be paid are obviously higher.
Good to know :
Some contracts do not accept the modularity of the due date, either downward or upward. Before asking the repurchasing institution to renegotiate the duration of the credit, you should therefore check this aspect. The study of its budget and its repayment capacity is also useful. It should also be noted that most banks refuse to extend the term of a loan unless the borrower’s budget is in the red with a high-interest rate. Others may also accept but only for a short term (extension not exceeding 3 years). It is important to ask for proposals from several banks to compete on the rate.
In short, extending the duration of your mortgage allows you to reduce your monthly payments. But if interest rates are rising, this could result in high costs for the borrower. This is why the institutions of repurchase impose certain criteria in this modulation of loans
The advantages of using a credit repurchase simulator
While buying back credit is considered a way to manage one’s monthly budget with greater peace of mind, it can also increase one’s indebtedness if the cost is high. If the amount of the monthly charge is not as adapted to the subscriber’s financial capacity, the latter could find himself even more in debt with the implementation of this operation. To obtain a better balance between the duration of the extension of the loan and the amount of the monthly installment reduced within the framework of this operation, it is thus judicious to carry out a simulation. This service allows him to first evaluate the feasibility of his project and its cost, whether it is a consumer loan buyback or a real estate loan buyback. It also helps him later on to select the most advantageous repurchase proposal about his needs and financial situation. It should be noted that the interest rate and repayment terms of the repurchase vary from one financial institution to another. Only by comparing buyback offers on the market can one obtain the most interesting proposal in terms of cost and capital amortization conditions. If the borrower has made a good choice, he or she can save money by using this service without having to travel from home. The free simulation can be done with the simulator tool at the top of this site. The candidate can use this calculator as many times as he wishes. After completing this form, he can access an estimate of the cost of this arrangement and one or more debt consolidation offers thereafter if his project can be carried out. This is why it is always said that the buyback simulation is the best way to find an attractive debt consolidation contract.
Debt consolidation and the Sellier law
It happens that during the repayment of the real estate loan, the debtor has difficulty in paying his many debts or in honoring his deadlines. This could be due to an unforeseen event, an accident of life such as death, divorce, dismissal, or disability due to illness, etc.. In this case, to prevent overindebtedness, he could resort to credit repurchase. This solution allows him to both reorganize his debts and to have an additional financing envelope if he meets certain conditions. Existing loans, including real estate loans, are then grouped into a single loan whose repayment is spread over a longer period. On the other hand, the monthly installments to be paid are lower than the monthly installments of its previous loans. This debt restructuring solution is easy if the owner can secure his loan with a mortgage on his property. Because it sometimes requires a guarantee from a person or a banking institution, if not a mortgage on a property. It should be remembered that there are age and ceiling conditions for this debt consolidation as well
By buying back his credits, the debtor does not keep his tax advantages unless he meets the following conditions:
the subscription of the credit repurchase must mention that it is made to repay or replace the initial loan.
The interest in the new credit that allows the right to tax deductions must not exceed the initial interest. To make this comparison, one must refer to the sum of the interest on the schedule of the initial loan and that of the credit repurchase.
Also, do not forget to mention the property tax return to which loan the new loan is being replaced. To do this, it would be better to attach the supporting documents. In any case, before initiating a credit repurchase or debt consolidation procedure, it is important to obtain information from the tax centers.
To keep the tax advantages in the context of a real estate purchase for rental purposes, it is also necessary to choose to purchase a home in a city where there is a strong demand for rental. Because there are a good number of dwellings that do not find tenants for a long enough time.
In short, credit repurchase can be compatible with the tax advantages linked to the Sellier law if, by consolidating the debts, the debtor has mentioned that the operation aims to replace the initial loan. The interest on the credit repurchase must also be lower than the initial interest. Otherwise, the right to the tax benefit is withdrawn and the interest from the lease will not be deductible.
How to obtain a credit buyback at the lowest cost?
While the debt consolidation is supposed to reduce the borrower’s debt and enable him to put his fiscal situation on a sounder footing, this arrangement could also lead him into the debt overhang if he does not put the offers on the market in competition before the subscription. This is important because interest rates and debt repayment terms differ from one institution to another. Other transaction parameters such as application fees, credit insurance, early repayment indemnities also impact the cost of the transaction as well as the broker’s brokerage fees. And they must be negotiated.
To help borrowers obtain a credit buyback at the lowest possible cost without having to travel from home, financial institutions and brokers have therefore set up a buyback simulator tool. This tool at the top of this site helps them to have very precise figures in mind about the cost of this arrangement (amount of the reduced monthly payment, duration of the operation and its cost, interest rate, amount of cash they can obtain, debt ratio before and after the operation, etc.). It also allows them to obtain a buyback offer. The interest of the buyback proposal they could obtain on a broker’s site depends on the number of partner banks of each placer and its negotiation capacity
To find out the savings that a borrower can obtain with this transaction, for example, he just has to use the simulator at the top of this site. By filling in the various information requested by the form such as the number of outstanding loans to be grouped, their amount, income and expenses, the number of debts to be repaid, etc., he can obtain in a few seconds an affordable credit buyback offer adapted to his situation. Finally, it should be noted that this process is completely free of charge and does not commit the borrower in any way.