The repurchase of owner loans is generally well accepted by banks due to the allocation of the property as collateral. But because the grouping of several credits in one strongly impacts your heritage and because the operation conceals many traps, we advise the owners who plan to buy back their credits to rebalance their budget and to follow these recommendations before committing.
Why is it important to prepare your file well? How does the bank analyze your request? What are the different deadlines? Do you need to use a broker specializing in credit redemption? Mortgage, IPPD or housing loan, what real estate guarantee? Is borrower insurance compulsory? What loans can you consolidate into one? What is the maximum term of the new loan?
Credit repurchase case: put the odds on your side
This stage does not involve any difficulty, but it should not be considered as a simple administrative formality. It is even essential if you want to put the odds on your side.
Here are 3 good reasons to be diligent when setting up a loan buyback.
- Submitting a complete file on time is a guarantee of seriousness and shows the lending organization your determination to complete the request.
- Avoiding multiple unnecessary round trips saves everyone time. Start collecting documents as soon as the list of supporting documents has been sent to you and do not forget that the deadlines for issuing a credit buyout offer are longer than for a conventional mortgage.
- Chasing customers to obtain supporting documents does not encourage your advisor to defend your request before his superiors. Make it easier for them by submitting a complete file on time.
A list which varies from one establishment to another
So immediately twist the neck on a received idea: no buyout of owner loans is granted without supporting documents. Many banks even require you to produce the original documents.
The list can vary from one establishment to another, each of them having its own policy on credit risk and its own analysis tools which allow verifying the creditworthiness of the borrower. In addition, depending on your situation, you may be asked for additional documents.
In all cases, the lender endeavors to verify your quality of owner and your level of income, to control the management of your bank accounts as well as the level of your debts (loans, taxes, unpaid invoices, etc.).
High application fees on the new loan
The administrative costs are significantly higher on a loan buy-back transaction since it sometimes takes up to 7% of the capital borrowed, except for owners including a mortgage. On the other hand, taking out additional services such as home insurance or a savings account can often reduce the bill.
False statements: what you risk
Financial difficulties are sometimes such that some people in over-indebtedness come to hide certain information in order to obtain a financing agreement. Please be aware that a false declaration is punishable by law. The Criminal Code provides for a penalty of up to 3 years’ imprisonment and a fine of $ 45,000 in the case of forgery and the use of forgery.
Everything you need to know about bank risk analysis
The managers of the analysis service are intractable on requests for the repurchase of credits, the risks of default of a borrower in a situation of over-indebtedness being statistically higher. The property guarantee provided by the owners is, however, a guarantee of security which often tilts the balance on the right side.
3 parameters are particularly analyzed and grouped together:
- The likelihood of the borrower’s insolvency.
- The amount of loan consolidation: the larger it is, the higher the loss in the event of default.
- The family and professional environment in order to prevent possible deterioration of the financial situation.
To obtain a loan offer
The prior offer is sent by mail within ten days of acceptance of the file. However, you cannot sign the offer before the end of the withdrawal period which starts the day after notification by post and which depends on the nature of the buy-back operation.
- If the amount includes more than 60% consumer credit: 14 calendar days (Sunday and holidays included)
- If the amount includes more than 60% of home loans: 10 working days (Sunday and public holidays excluded).
For the release of funds
The funds are disbursed a few days after the signing of the offer. It is the notary who is responsible for transmitting the call for funds to the bank, for settling the various debts and, if necessary, for transferring the extra cash buffer to your account.