Discover the cost of a real estate loan buyback, an operation to renegotiate a rate but which entails fees, here is the complete overview on the costs of the operation.
Takeover of mortgage loan: the principle
A borrower who has taken out a home loan during a period of unfavorable interest rate may ask to have it redeemed, it is a banking transaction proposed by credit institutions to allow this borrower to readjust its terms of repayment. The purpose of the mortgage repurchase is to take advantage of lower rates to realize savings on interest, we must not forget that costs are expected and that the difference in rates must be at least one point for the operation to be profitable.
It should be noted that it is in this specific context the repurchase of mortgage loan, not to be confused with the consolidation of mortgage loan whose purpose is to reduce the amounts of monthly payments, an operation that increases the total cost, the contrary effect expected by the purchase of home loan.
The expenses related to the repurchase of mortgage
Repurchase your mortgage loan from another bank will incur fees, here they are in detail.
IRAs or prepayment indemnities
Reimburse a mortgage before its term leads to penalties, it is commonly known as prepayment benefits. The amount of these fees can not exceed 3% of the outstanding capital, some banks offer contracts without IRA, so it is advisable to check his contract to know whether they will be paid or not.
Subscribing a mortgage will require to take a guarantee, a logical requirement of banks to ensure the repayment of their loans in case of default, depending on the banks, two guarantees are possible: the bank guarantee or mortgage. The establishment of a new mortgage will lead to a visit to the notary to lift the old mortgage and set up the news, it is called a show of hands. These fees, including notary fees, are valued at less than 1% of the mortgage amount.
The recourse to the repurchase of real estate credit will require the instruction of a file by the bank which buys, which can cause expenses of file. This part is however negotiable in the context of the repatriation of bank accounts, they are often fixed or then defined by percentage on the amount of the mortgage (less than 1%). Note that through a broker, it will be necessary to add this amount in the total costs, the brokerage fees are estimated at 1% on average.
The combination of all these costs justifies the need to note a difference in rates of at least 1 point in favor of the borrower but it is only the total cost of credit that will know if the repurchase of mortgage is interesting it is therefore appropriate to compare this cost with the amount remaining to be repaid with the current lender. Note that borrower insurance can also be a significant part of the cost of the loan, this coverage can also be negotiated.