What you need to know about buying credit at the beginning of the year
In January 2017, the share of credit repurchase in the total production of mortgages granted reached a new record. Banks still offer new conditions for this financing, but to take advantage and avoid some pitfalls, it is better to know the criteria for this operation at the beginning of the year. Here are our answers to your questions.
Is the repurchase of credit always advantageous?
Admittedly, the downward trend in interest rates has come to an end since mid-December, although the trend has begun to rise again, but it is clear that financing conditions are still attractive. The proof to date, the average interest rate (all terms of repayment combined and excluding insurance) is 1.49%, according to the housing observatory. For comparison, a year ago, this average was 2.07%, according to the same sources. As a result, even though rates have risen for the past three months, there is still time to redeem its mortgage and to benefit from more favorable conditions for the repayment of its outstanding capital. However, for the operation to be interesting, certain criteria must be respected. As a reminder :
- There must be a difference of at least one basis point between the initial rate of its loan and the proposed rate for the redemption of the outstanding principal.
- The home loan to be redeemed must be recent. In other words, the borrower must be in the first third of the repayment of his outstanding.
Have the criteria for credit redemption evolved?
Despite the rise in interest rates and the socio-economic uncertainty, it should be noted that the conditions for obtaining a buyback of credit have hardly changed. But like all other types of financing, not all borrowers enjoy the same loan buyback conditions. The criteria may change depending on the borrower profiles, the types of financing or the complexity of the operation. To know that even if all the borrowers must imperatively respect certain criteria, what really counts is to reassure the new bank on the stability of its professional situation, on the regularity of its incomes, on the serenity of its banking behavior or again on the part of his income devoted to the repayment of his debts. In all cases, in order to be financed, a debt repurchase project must fit into certain global criteria and other conditions that may vary depending on the bank and the situation.
Are banks afraid of plans to buy credit?
Since the relaxation of refinancing conditions with the banks (private or mutual) are competing fiercely on all terrains. Despite very ambitious goals, banks are not quite like other companies. They do not like the risk, which is why some of them do not deal with certain projects of financing considered uncertain. It can be a real estate loan such as loan redemption. To know that with the new legislative frameworks, the lending institutions must guarantee themselves with more of own funds, from where the privilege granted to the habitat financing with personal contribution.
However, while some lenders favor housing loan projects, it should be noted that others prefer to focus more on loan buybacks that can allow a bank to improve its market share by offering customers competitors of the best financing conditions. In all cases, banks are not afraid of plans to buy credit, even the regulatory and objective requirements push some banks to focus on applications for housing finance.