What if you can not pay your credit?
DEC. 2018 | PROPOSED BY OUR PARTNER ING LUXEMBOURG
So far, everything was fine for you. And then, one day, things start to go wrong. After a few months, you are no longer able to repay your loan. What to do ? Does the bank that gave you the credit have the right to take back your property? Who really owns your home until you have paid back all of your credit?
Whether you have financed the purchase of your home with a mortgage loan, you remain the owner. Contrary to popular belief, the mortgage is a right granted to a creditor (in this case, the financial institution that has granted you the credit) on real property as security for a debt without the owner being dispossessed. In other words, it is not because the bank grants you a mortgage loan for the purchase of your home that it is de facto the owner.
The last end: the forced sale
Your home belongs to you and you do not grant any title deed by contracting a mortgage. So you will not risk landing your banker enter your home without your permission, collect rent or decide who can live there simply because you no longer repay your loan. In Luxembourg, as in most European countries, banks can not even take over your house. The only right that the mortgage grants to the bank is that of obtaining in court the sale of your property and being paid on its price by preference to the other creditors, in case you do not respect your obligation guaranteed by the 'mortgage.
In addition, you should know that the bank only uses this forced sale as a last resort. This option is not in his interest, nor in yours for that matter. The sale of real estate at auction is full of uncertainties. There is no guarantee that the proceeds of the sale will be enough to pay off your debts to the bank. You always run the risk of seeing your property sold under the market value.
Privilege solutions amicably
In case of delay, suspension or termination of your monthly payments, it will not do you any good to ostrich. Time is against you and the longer you wait, the more the solutions will shrink. The best thing to do is to contact your bank as soon as possible and look for an amicable solution to reduce your monthly financial burden. Several solutions can be considered after a study of credit and the agreement of the Credit Committee.
The first is to request a temporary deferral of capital repayment . The monthly payment consists of a portion of capital and a portion of interest. Under certain conditions and in a discretionary manner, the bank may grant a moratorium or temporary deferral of capital repayment. Interest will not be carried forward and will even be subject to a slight increase during the effective period of the moratorium.
The second solution is to request an extension of the duration of the mortgage contract . This extension is provided for in certain forms of credit such as floating rate loans . In this case, the repayment of principal will be spread over time and will reduce your monthly charge. On the other hand, in the case of a fixed rate loan, a renegotiation, or even a new credit agreement, is to be expected.
An early partial refund is another option. If you have significant savings available, you may want to consider a partial early repayment of your mortgage, which will lower the monthly charge. Compensation is however to be expected.
Finally, you can choose a repurchase of credit . If you have borrowed in a period of high rates, you still have the opportunity to renegotiate this rate down. As interest rates are currently very low, updating your rate level will allow you to lower the monthly payments.
In summary, Do not panic if you are having trouble repaying your loan. You always stay the owner of your home. Speak with your banker as soon as possible and find the best solution for your situation. This may result in additional costs, but at least you will avoid having to separate from real estate for which you may have already spent a lot of time and money.
For more information, please visit www.ing.lu/immo or visit us at the branch.
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