Reusing your mortgage: is it possible?
OCT 23 2018 | PROPOSED BY OUR PARTNER ING LUXEMBOURG
If you have a current or previously paid mortgage loan and want to re-borrow, you can do it cheaply with the recovery of outstanding loans. But what is it, when can it be used and what are the savings?
Reusing your mortgage is a way of recycling your credit. Subject to acceptance of a new credit by your bank, you can re-borrow all or part of the principal repaid at the mortgage rate of the moment to finance a new real estate project, whether to acquire a second home or a property report , renovate your home or buy back your spouse's share of the family unit during a divorce (or separation for cohabitants).
The mortgage registration initially taken on the house remains valid and can guarantee this new credit contracted in the form of a recovery of outstanding.
Fewer fees, more benefits in addition
The big advantage of recovering outstanding amounts is essentially financial. You avoid the costs of a new mortgage registration and do not have to go back to the notary. As long as the new credit does not exceed the capital already repaid until then. Thus, if the total capital repaid of your current loan is € 250,000, you could in principle re-borrow up to the same amount. On the other hand, if you want to borrow beyond the repaid principal, your bank will probably demand additional collateral , which will incur costs.
You can also benefit from the same tax benefits depending on your personal situation as well as the duration and purpose of your new loan. And if you plan to take out a new loan in the near future, you will have a good chance of taking advantage of more advantageous conditions given the current low interest rates.
A possible recovery under certain conditions
In theory, the recovery of outstandings seems the ideal solution to re-borrow but in reality, it is a little more complex. Banks are not required to accept a request for recovery of outstanding loans and some of them do not allow it in their general terms of mortgage credit. Moreover, when they accept it, financial institutions raise a number of conditions that may vary from one to the other but generally contain the following points.
You must prove that your current level of income allows you to support the new credit load. You must have repaid a certain portion of the capital before you can re-borrow. Your new credit can only relate to one real estate project. For a maximum of 30 years, your current mortgage must cover the duration of the new credit. Finally, a minimum amount to borrow is usually required. Clearly, if your loan is for small jobs in your home, the bank may refuse you the recovery of outstandings and advise you rather a personal loan.
Also, be aware that the rate applied to your new credit will be the one in effect at the time of your loan, not the one applied to your previous mortgage, and you may need to renegotiate with your banker. While the rates are low at the moment but nothing says that they will be still in a few years when you decide to opt for a recovery of outstanding.
The question that can make the difference
If you have not yet taken out a mortgage loan, consider asking about the reuse of the mortgage when it is time to contact the different banks to finance your home.
If a bank offers a rate of interest slightly lower than the competition but it does not allow the recovery of outstanding, it is worth thinking twice before you engage with it ...
For more information, please visit www.ing.lu/immo or visit us at the branch.
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