The transfer of mortgage is a common practice among our European neighbors but little used in France. This option allows you to keep the interest rate, borrowing insurance and guarantees conditions in your current home loan for the acquisition of a new principal residence.
What are the benefits of the transferable loan?
Loan transfer is a clever idea to save money by limiting the costs of setting up a new loan while keeping your borrowing rate.
Many people focus on the interest rate, the cost of insurance, fees … but few think to take into account the option “transfer loan” when subscribing a mortgage. However, during a rate increase period, the transferable loan is an economically attractive option!
Why use loan transfer?
The ” credit transfer ” option considerably facilitates the process of a second purchase. The borrower can thus preserve the conditions of his initial loan. However, for the credit to be transferable, the amount of the acquisition must be at least equal to the outstanding principal of the outstanding loan.
The loan transfer saves time and money:
- Prepayment penalties are non-existent (only administrative fees may be payable during the transfer),
- The deposit is also transferable (savings on fees)
- Retention of the financial conditions granted a few years ago (very advantageous if the rates were low).
- Get a principled answer from the bank faster!
To use the loan transfer, it is important to consider whether the contract provides for this clause and under what conditions. Before making a loan transfer, care should be taken to calculate if the savings are real, especially if the rate obtained by the client was particularly low compared to those practiced.
You can take advantage of it by going directly through your bank or by having recourse to a real estate broker.
Transferable loan example
Here is a concrete example of the benefits of portability for a new acquisition, take the following situation:
- Today, a Parisian couple buys a property and borrows 200,000 euros over 25 years at 2.30% or a monthly payment (excluding insurance) of 877.22 euros.
- Ten years later, this couple wants to move. They need to borrow 200,000 euros to acquire a new property and consider they can repay the new loan over 15 years. Meanwhile, rates have risen to 3.50%.
- Without the loan transfer option, this couple must pay off their old loan and then borrow 200,000 euros over 15 years at 3.50% or a monthly payment (excluding insurance) of 1429.77 euros.
- With the loan transfer, the couple will continue to repay their outstanding loan for the remaining 15 years, ie a remaining capital of 133,435 euros and a monthly payment of 877,22 euros. They will need to borrow 66 565 euros remaining at the rate of 3.50% over 15 years with a monthly payment of 475, 86 euros.
The gains made through the loan transfer:
Thanks to the loan transfer option, the couple saves 13,804 euros on the total cost of interest.
The monthly payment goes to 1353.08 euros against 1429.77 euros if the couple subscribes a new loan is a gain of 76.69 euros / month.