Real estate credit including a buy back of consumer credit
When a repurchase transaction is contemplated, it is entirely possible for the borrower to include a consumer credit in a home loan. Thus, there will be only one monthly payment to pay for all its loans. A consumer loan is contracted in most cases for the acquisition of a consumer good, such as a car for example or for the realization of work, in short when it comes to having a sum money sometimes substantial. Several options are possible, either through a specialized institution, a bank or both.
Consolidation of all credits
Traditional banks have a very specific policy regarding their credit agreements. It is often much more difficult to obtain from them a repurchase of credits in course which is integrated into a mortgage. On the other hand, specialized establishments can much more easily grant them than personal credits, revolving credits or assigned credits are included in a mortgage.
The principle of a loan buy-back operation is therefore to combine all consumer loans and mortgage loans into one single loan. In addition to collecting all loans that are still in repayment, it is also possible to add a cash fund for a new project. Thanks to this financial arrangement, the amount of the monthly payment of the new credit can be reduced to a greater or lesser extent. The consequence is that the total cost of credit is then higher, in short, it increases with duration. Regarding the new project to finance, it may well be a sum dedicated to real estate, whether to carry out work in the house, but also to acquire a home, house or apartment.
This financing option has the advantage that there is only one intermediary during the entire repayment period of the credit put in place. This may have the advantage of a monthly deadline adapted not only to the repayment capacity of the borrower but also to a period that suits him. However, be careful of the eligibility of the borrower as the feasibility of the transaction because the amount that can be obtained in the context of the mortgage is limited.
Subscription to a real estate loan with buy back of credit
To access property, households have the opportunity to facilitate the management of their monthly budget by subscribing to a grouping that includes all their conso credits and a new loan. This approach is particularly interesting when there has previously been a refusal of financing for a real estate acquisition from a bank for example. Often the main reason for a negative answer is the debt ratio that goes beyond the allowed average of 33%. The buy-back process then makes it possible to finance the housing project on one side and to pay off the other’s debts. It is finally a process identical to that of a purchase of credits also including a sum allocated to a new project, except that in this case it will be in the real estate sector.
The viability of the project, as well as the study of the file will be seen in the spotlight by experts who will check in parallel the eligibility of the borrower. The single monthly payment will then correspond to a single debt, and will have the advantage of being adapted to the income of the borrower. Its rate will of course be renegotiated.
A home loan with a consolidation of consumer loans can also be obtained in another way, once the redemption has been validated. As a result of the reduction in the amount of the monthly payment, the debt ratio of the household falls and new financing is then possible. It is this one that will allow the purchase real estate (apartment, house, ground, works of extension). However, be careful about the limit of the debt ratio that must be scrupulously respected. Here again, the financial health of the borrower will play a key role, it will be carefully studied for the validation and implementation of the project. This will depend on the total amount of consumer loans to be repaid and the amount allocated for the mortgage loan once all the credits have been bought back.
The rates of these two joint operations are in general always interesting. In the case of real estate credit it can be really profitable. The advantage of separating the two approaches is to be able to address a side to a specialist credit redemption, the other to a mortgage expert, even they are separate, so necessarily longer in time.
Barriers that may arise
The feasibility study as well as the file is taken very seriously by the lender that will grant the buy. In the case, for example, of a consumer credit for a consumer good, the bank will be less indulgent than when it is a car. Why? Because in this second option, the means of transport is considered indispensable, especially for active life, which is why banks are more flexible.
Ditto for the history of consumer credit bought back, if it concerns a request for cash to settle debts, the lender will be more reluctant to give a favorable response to a loan application.
Another important element to consider is the age of the borrower. Even if today it is possible to borrow at all ages, seniors are currently in the line of fire for financial institutions, it is better for example to have a capital. Making a request to buy a consumer credit and at the same time make a mortgage is more affordable by meeting this optimal criterion. Being a young active borrower is always an asset.
Be already in debt and borrow
From the moment when there is a mortgage, there is one rule that can not be waived: the debt ratio. To avoid over-indebtedness, it was set by banks and financial institutions so as not to exceed one-third of household income. The rest to live is another important element that will be taken into account, so when consolidating all consumer loans the amount of the monthly payment can be revised downward.
It should be known that the sum requested for the mortgage credit including a repurchase of credit conso can be amputated, it will remain then only the solution to borrow less to acquire a good. Otherwise there is also the solution of the credit smoothed, that is to say that there will always be a single repayment monthly for the duration of the loan. Part of the refund will concern the mortgage, the other the consumer credit. When it is sold, there will only remain the main credit with a larger share to repay.