Free credit buy-back.
Suffice to say at the outset, getting a credit buyout at no cost is mission impossible. The bank or the credit institution promising you this miracle is not serious. Indeed, between the administrative costs, the indemnities linked to the early repayment of your credits or the cost to set up a new guarantee, there are several types of costs to be expected to carry out this operation.
This financial arrangement without any costs does not exist, but it is possible to chase the costs in order to achieve a profitable operation. Here’s how, with a specific explanation of the fees you need to consider.
Fees related to a loan buy-back
Allowances for early repayment
The vast majority of fixed rate loans carry an indemnity. This contractual penalty applies when you have a loan redeemed by a new bank. In fact, the redemption balances your old credit, the original lending organization therefore suffers damage following this reimbursement, and the penalty makes it possible to cover all or part of this damage (loss of profit).
The amount of compensation is capped by law. The early redemption indemnities cannot therefore exceed six months of interest or 3% of the principal remaining due.
Application fees and brokerage fees
Taking out a new loan (which includes the old ones) sometimes involves setting up administration fees.
These fees compensate the bank that studies and prepares the file. How much are these fees? They can vary from 1 to 1.5% of the capital borrowed. In addition, if you choose to trust an intermediary to find the best offer, it is possible that brokerage fees may apply in addition. This is the remuneration of this intermediary, because he takes care of all the procedures for you.
Brokerage fees are generally free with online banking intermediaries such as Millia bank solutions.
New warranty fees
The establishment of a new bank loan also supposes the signature of a guarantee linked to this loan. When you cleared your old credits, the guarantees that were linked were removed. A new guarantee must therefore be put in place (mortgage, surety, lender’s privilege).
Depending on the guarantees you previously had, fees will be payable. This is the case if you had a mortgage in place. Release fees will be payable, equivalent to the amount of the initial loan multiplied by 0.75%.
Your new loan must have insurance. If you take out death or unemployment insurance for your credit grouping which includes a home loan, the rate will undoubtedly be higher than when you had taken out this insurance for the first time during your purchase!
You have “grown older”, and your health risks are higher. The cost of loan insurance is to be taken into account to carry out your operation, and finding an offer at the best rate is essential.
Reduce the cost of a loan buy-back
How to reduce the costs of a loan buy-back? You have very little room for maneuver regarding early redemption indemnities. Since their framework is fixed by law, and their calculation is detailed in a contractual manner, you cannot delete them.
The same applies to warranty costs. You can however act in order to request a gesture regarding the application fees, or trust a banking partner who does not apply this type of fee. Millia bank solutions offers, for example, completely free support for the client, remuneration being integrated into the operation. You do not have to pay any additional fees, once the agreement is validated, you will only pay the monthly payments of the new loan.
Another way to save costs, the insurance component. It is possible to find a tailor-made cover, adapted to your borrower profile, again through a banking intermediary.
It is essential to define your insurance needs. Do you really need a job loss guarantee? Do you need 100% coverage for each borrower? By selecting the right cover, you can save several hundred or even thousands of euros over the entire term of the loan.