The repurchase of credits is an operation which makes it possible to take care of its debt ratio, and thus to reduce the weight of your repayments compared to your income. Consequently, grouping together several consumer loans and reducing the overall monthly payment can serve as the first step in order to calmly carry out a real estate project. You can mechanically increase your ability to borrow! How to use this montage well in this context. Here are the explanations.
Do you want to become an owner? To give you the apartment or house of your dreams, you are going to need a loan. The problem is that to convince the banks to support you, and to give you enough money to buy the ideal property, you need a good financial record .
If your income is not very high or if you already have several lines of credit that accumulate each month, it may be good to try to restructure your debts .
The primary objective is to participate in household deleveraging. The idea is thus to reduce the overall debt ratio, to increase the share of the remainder to live (sum of money which remains at the end of the month once all the incompressible expenses and the credits settled).
You can fully approach banking organizations with this objective in mind to make a real estate investment in a second step. Banks and credit organizations will favor files that are motivated by a desire, and with solid foundations.
To understand how buying back credit can help you make a real estate purchase, let’s take the example of a couple whose net monthly income is $ 4,500. The couple are currently repaying three credits, for a total monthly payment of around $ 1,000 (with a consumer loan for the purchase of a car, and two personal loans).
The estimated debt ratio of the couple at the time of filing their file and 22.2%. Banks often apply the so-called “33% debt” rule. They try to ensure that the total credits outstanding do not exceed 33% of the available income. This rule is not mandatory and is completely variable from one establishment to another, but it nevertheless serves as a good benchmark.
In the case of our couple, this means that they still have the right to borrow up to 10.8% of their income, or $ 486 per month. It’s their debt capacity. An amount that cannot be used to buy property of $ 200,000 or more.
Via a grouping, the couple spreads their credits over a new longer period (10 years) and manages to reduce their monthly payments by half. From now on, the total of the credits in progress goes to 500 $
Their debt ratio after the operation is thus halved, and drops to 11.1%. This means that they can now borrow up to 21.9% of their income without exceeding 33% of debt. This represents a sum of $ 985.5 per month! Sufficient for a property purchase of $ 200,000, for example, with the rates currently in force.
As seen with the example above, loan consolidation can prove to be a great solution in order to clean up your finances and reduce your debt ratio . You will thus be able to improve the quality of your file and therefore the chances of obtaining good conditions for your mortgage. Is it possible to integrate a new mortgage directly into a loan buy-back? No.
Its main objective is to consolidate loans already in progress, whether they are consumer loans or home loans elsewhere. It is not possible, during the consolidation, to request a new loan offer and integrate it into the arrangement. The two operations must be carried out one after the other. First, deleveraging and cleaning up your finances. Then apply for a mortgage to buy an apartment or a house.