The repurchase of credit is a solution which consists in requesting a lending organization so that it buys back all the loans in progress (mortgage, consumer credit, car loan, etc.). The borrower can then take the opportunity to add a new loan to finance other projects, including its work.
What are the advantages of buying real estate loans including the financing of works? What are the specifics of such an operation? Is it possible to renegotiate or buy back the only mortgage with an extension? What can we do as work following a loan buy-back? Do not panic, we inform you!
Finance its work through the purchase of credits
Real estate constantly demands improvements in terms of living comfort and equipment. However, an owner does not necessarily have the budget necessary to cope with larger works such as renovations, fitting out a new room or renewing water pipes.
Without counting the cases in which these works are to be done in an emergency which has the effect of causing unforeseen expenses. The first reflex consists in going to a bank or to a lending organization in order to apply for a consumer loan.
Is the consumer credit option wise to finance work at home? It all depends on everyone’s financial situation, but in general this option is not always welcome.
Indeed, a work loan is an additional line of expenditure for borrowers but also for lending organizations that study their profile. This new deadline may even tip the debt ratio beyond the reference threshold of 33%. If so, taking out consumer credit with a bank will become difficult.
Another disadvantage of going through a simple consumer credit to finance his work: the interest rate applied. The latter is higher than that practiced for a mortgage for example. One of the solutions is to use your mortgage to integrate the envelope reserved for housing work. To achieve this, several possibilities which do not all imply the same financial consequences, are possible:
- renegotiate the terms of your mortgage with your lender;
- perform a credit consolidation;
- buy back home loans and works.
Why opt for the repurchase of credits to carry out work?
Redeem your credits to finance your work? If the solution may seem surprising at first, it has many benefits for the borrower:
- take out a loan at a better rate than a conventional consumer loan;
- not to complicate the management of its budget with an additional monthly credit term;
- smoothing out work expenses over a longer period;
- reduce household expenses compared to a work loan alone;
- comply with debt standards (debt rate of 33% and remains to be lived) and leave yourself a margin to take out a new loan thereafter.
Borrowers wishing to control their budget, encountering financial difficulties or wanting to benefit from the intrinsic advantages of buying back loans therefore have every interest in using this method of financing.
Can I buy real estate loans to finance my work?
If the renegotiation of credit with your banker fails, another solution to reduce your repayment deadlines is to contact a third-party financial institution to carry out a repurchase of credits. The latter can then buy back the mortgage, always with the aim of improving the financial situation of the subscriber.
However, the repurchase of real estate credit entails additional costs which must be taken into account in its calculations: prepayment penalties for the repurchase of the initial loan, transfer costs, costs of provision of guarantees (mutual guarantee, mortgage loan, etc.).
For the repurchase of mortgage to pay, it is necessary that the difference between the two rates is at least equivalent to 1 point, that the duration of credit remaining to be reimbursed is greater than 10 years and that the capital remaining due is greater than 100,000 $. The fall in the interest rate is passed on to the amount of the monthly payments or to the total duration of the loan.
But, here again, the repurchase of mortgage does not authorize to include a work loan. This operation increases the room for maneuver for easier access to obtaining additional consumer credit at more favorable rates.
Can I buy a mortgage and work loan to finance my work?
If the simple repurchase of mortgage does not directly make it possible to obtain a cash to finance its works, the borrower can however integrate the amount wished at the time of the repurchase of credit. What are the consequences of such an operation?
The borrower takes advantage of the drop in the loan rate, not to lighten its maturities, but to free up an envelope immediately dedicated to financing exterior or interior works in his property or in the apartment he rents, in his residence main or for his holiday resort.
What can I do following a repurchase of work credits with extension?
The construction loan makes it possible to carry out a multitude of operations to renovate and beautify your home. Without being exhaustive, we can mention:
- the purchase of credits for interior work such as the purchase and installation of double-glazed windows, an equipped kitchen, an Italian shower in the bathroom, insulation materials or attic cleaning, etc. ;
- the purchase of credits for extension works such as the construction of a garage, veranda, spa, swimming pool, etc. ;
- the repurchase of credit for renovations of a dwelling or a room such as the upgrading of electrical or heating equipment, the installation of renewable energy equipment, the repair or cleaning of a facade or a roof, etc. ;
- the repurchase of credit for the works of decoration like the application of paint, the installation of tapestry, etc.
The advantage of the works credit is that this category of investment is generally perfectly sized, provided, however, that the cost of the work to be carried out is prepared in advance (presentation of quotes from the contractors and craftsmen requested). Then, the personal loan is adjusted to the projected amount, as is the rate and duration of repayment.
Good to know: a peculiarity should be noted, however, for the repurchase of a mortgage loan including or not a work credit.
In the case of a standard home loan, the amount released by the lending organization is transferred directly to the notary in charge of the real estate transaction. For a conventional work loan, the funds are entirely paid to the borrower.
On the other hand, in the case where the future owner chooses to associate a work loan with his mortgage, the funds which correspond to the acquisition of the accommodation are given to the notary, while the sum reserved for the financing of the work is gradually returned to the bank account of the new owner subject to presentation of invoices. The responsiveness of the lender is therefore essential, on pain of the borrower having to advance the money to settle the companies carrying out the work.
Can I renegotiate my mortgage to finance my work?
The renegotiation of a mortgage in order to associate a sum to do its work is not feasible from a technical point of view. Renegotiating simply involves revising the borrowing rate downward but does not allow the inclusion in the discussions of adding a financial envelope dedicated to the work.
On the other hand, renegotiating a home loan is used to make substantial savings and to reduce the monthly repayment. However, the lender must be willing to start discussions on the subject and the two parties must agree on a common mortgage rate. The borrower must aim for a drop of at least 0.7 points to be a winner.
In the end, the renegotiation of a home loan is indirectly used to finance housing work. It can allow the subscriber to rebalance his situation and increase his borrowing capacity, therefore to present a consumer credit file hoping for a more favorable outcome than if he had done so without renegotiating his mortgage.