Like many French people, you may have chosen to build your heritage by becoming owners. Some of you even own one or more properties in addition to your main residence. Whether it is a second home or rental investment property, several home loans are then necessary to finance these acquisitions. Each month, all of your reimbursements can sometimes weigh heavily on your budget. The question then arises: should I consolidate all of my mortgage loans to lower the monthly payments? What other advantages will I gain by redeeming my mortgage? What are the precautions to take before carrying out such an operation? Follow the guide.
Combine mortgage loans to take advantage of lower interest rates
As of spring 2019, mortgage rates were below their historic lows of fall 2016, with an average of 1% over 20 years.
The decline continued throughout the summer before seeing a slight recovery in the fall. In this month of November 2019, mortgage rates remain close to their lowest levels with an average of 0.95% over 15 years and 1.15% over 20 years. The best files can obtain rates of 0.56% over 15 years and 0.74% over 20 years (see here the barometer of mortgage rates).
If you have several home loans, the first good reason to combine them will be to take advantage of a lower borrowing rate for the single loan that will replace them.
To lower your monthly payments and your debt ratio
The principle of buying back credits is simple. It consists in redeeming all or part of your outstanding loans (real estate loans, consumer loans, revolving loans, personal loans) to group them into a single consolidation loan, the conditions of which will be more advantageous.
By consolidating your previous mortgage loans, possibly with other consumer loans, you will be able to reduce your monthly payments. This reduction can sometimes be very significant.
The reduction in your monthly payments is most often obtained with an extension of the duration of your loan (the difference in rates amortizing the additional cost due to this extension of duration).
In the end, the amount you will repay each month will be less than what you spend with all of your previous credits.
You thus benefit from greater purchasing power and a more balanced budget with a reduced debt ratio (calculate your debt ratio).
Redeem your credits to simplify your management
The desire to consolidate your old mortgage loans can also be justified by a need to clarify your management.
In fact, after having made your loan buy-back, you only have one line of credit and one contact for your loans.
As we have seen, you can also include all of the other loans to which you have taken out in your mortgage repurchase.
Whether consumer loans, earmarked loans, revolving loans or personal loans, you have the opportunity to gain peace of mind in the administrative management of your monthly repayments.
A repurchase of your mortgage loans to finance new projects
One of the great advantages of buying credit is that it allows you to incorporate an additional amount into your new single loan. This solution can be a good way to finance new projects without unbalancing your budget.
This additional sum may take the form of additional cash, limited to a maximum of 15% of the amount of loan redemption. This is called unallocated cash, that is to say free to use, the amount of which is released upon signature of the loan buy-back.
It can also be an amount intended to finance a particular project, such as renovation work, the purchase of a car, or the acquisition of capital equipment.
In this case, the additional amount is included in your repurchase of mortgage loans and you will have to present proof, paid quote or invoice, so that the funds are released.
Precautions to be taken before redeeming your credits
Combining your home loans can be very useful. However, precautions should be taken.
First, the ideal situation requires that you be in the first half of the term of your loans, when it is the interest that you are paying back. The more interest you have left on your old loans, the greater the gain.
In addition, we consider that the difference between the old rate and the new one must be at least 0.7%, or even 1% for you to be a winner. However, you should also not overlook the gains you can get on your new loan insurance.
Finally, buying back credits is never free. Particularly in the context of a repurchase of mortgage loans, most often linked to mortgage guarantees. Generally, it will be necessary to carry out an appraisal of the financed property or properties. The cost of a mortgage loan repayment is thus slightly higher, because the mortgage also requires passing before a notary in order to establish a notary deed, which generates notary fees (about 2% of the loan amount).
You will also have to plan the administrative costs to finance the opening of the new credit, the costs of guarantees or suretyship, and also the costs of early repayment of your old credits.
In general, if you want to buy your home loans by giving you every chance of success, we advise you to hire the services of brokers who specialize in buying loans. On the one hand, they will be able to direct you towards the most advantageous offers and the best suited to your situation, and on the other hand, they will allow you to save time on the competition between banks and for the constitution of your request .