Extending the term of a home loan may reduce monthly payments, but is this possible? What are the possible solutions?
Real estate loan and repayment term
At the time of the subscription of a home loan, the borrowers will make the choice of a duration, some of them are fixed on a duration not to exceed, example 15 or 20 years, or the borrowers will focus on a maximum monthly payment, which automatically calculates the definitive duration. However, in some cases it is possible to end up with a repayment period too short, resulting in heavy monthly payments which, coupled with an unforeseen event, can lead to an unstable situation. The solution to get out of a financially complicated passage may be the lengthening of the repayment period.
Some credit agreements provide for modulation of monthly payments, plus or minus 10% and sometimes for a defined period. Otherwise, the extension of the repayment term of the mortgage is possible with the renegotiation of credit and the repurchase of mortgage. An operation involving recalculating all the credit as a whole but making it possible to offer the borrower a longer duration.
Renegotiate the term of the mortgage
The renegotiation of mortgage loans is best known for negotiating a preferential rate, particularly due to a decline in rates on the real estate market. Simply, this is not the only feature of this operation, it is also possible to renegotiate the duration and / or the monthly payment, the interest being for the borrower to repay a monthly adjusted to his ability to repay and especially him to honor one’s debts.
On the side set up, it is necessary to address to the bank which granted the loan and to request renegotiation of the current contract. An amendment will be put in place and signed by both parties to formalize the implementation of the renegotiation, the new term will be effective the following month. Not all banks are required to accept a renegotiation and if so, then a home loan will have to be repurchased.
Lengthened duration with the repurchase of mortgage
The repurchase of mortgage loan is an operation that is to apply to a bank or a credit institution to ask him to buy the home loan in the course of repayment. The borrower therefore needs to file an application by adding the necessary supporting documents, including the current loan schedule. The bank may propose a repurchase taking into account the needs of the borrower, in particular on the duration of the repayment of the monthly payments.
On the side set up, it is necessary to file a file with a specialized organization, which will result in the payment of expenses (included in the amount of the final credit) like the prepayment indemnities, the expenses of guarantee (mortgage, notary) or still the expenses of file. It is also possible to include consumer credit in the operation, but at this point it is more like a pooling of credits.