In a context increasingly favorable to borrowing, credit interest rates being particularly low for 3 years, it is common to consider the purchase of outstanding debt by a new body to benefit from the decline rates.
While the average interest rate of over twenty years was 3.20% in June 2013, at the end of May 2015 the average interest rate over 20 years is 2.20%, a decrease of 1 point within 2 years. This is obviously the perfect time to study the repurchase of its mortgage.
If you are more likely to get a better financial offer than your current borrowing terms, the comparison does not end there. We will try to give you the essential keys to a complete comparison of the new proposals that are made to you.
Insurance: contingency coverage and cost
In a move to buy real estate credit by competition, insure the risks of life is an essential element not to neglect.
Indeed, insurance coverage repurchase compulsory credit, no!!! But it should not be forgotten that it makes it possible to avoid difficult situations in the event of a fall in household income linked to a hazard. Care must be taken to maintain the same guarantees as for the original loan unless the borrowers’ situation has changed since the credit was put in place.
For example, in the event of a change of status of one of the two borrowers: He was previously a private sector employee and is now a public servant or if the borrower is retired in the process of buying back credit. In the first case, if the borrower had a loss of employment insurance cover, then it is no longer useful given his new status. In the second case, the loss of employment cover and temporary incapacity for work (ITT) no longer have any purpose, since it is no longer active.
Apart from certain changes in circumstances, it is therefore necessary to maintain similar coverage or even strengthen it. Indeed, the purpose of the real estate loan consolidation is to reduce the cost of borrowing through better financial terms. The saving realized over the duration or the monthly payment can therefore be assigned to an increase of life accident guarantees.
Finally, before starting a loan buyout project by the competition, it is important to take stock of your state of health. If health conditions or problems have occurred since the loan was put in place, then these may have an impact on the effective gain of your credit buy-back or even its feasibility. Indeed, when collecting loans, you will be submitted to a medical questionnaire that takes into account your current medical situation (at the time of loan redemption).
In case of particularity, the insurance company may refuse the assumption of responsibility or apply a surcharge (increase of the monthly insurance contribution for the insured).
In order to compare the cost of insurance, it is interesting to refer to the monthly coefficient. This insurance coefficient is expressed in relation to the borrowing monthly payment. In addition, some bank proposals include the total cost of insurance over the entire term of the loan.
Credit redemption: the cost of the new banking relationship
Indeed, the purpose of the real estate loan consolidation is to reduce the cost of borrowing through better financial terms. The saving realized over the duration or the monthly payment can therefore be assigned to an increase of life accident guarantees.
It is also very useful to compare the price of banking services. Most often, the bank that makes you a proposal for credit redemption requires the domiciliation of income as a counterpart. Which implies to become a customer as a principal.
The majority of banks offer a “package” of services with a monthly fee. This is an element to consider when comparing two proposals.
The repurchase of a loan by a new banking institution must therefore be studied in a global way. To really win on this operation, it is essential to consider the proposal in its entirety and not only through an interest rate.