To finance the acquisition of real estate: houses, apartments, etc. individuals often resort to bank loans.
They spread the repayment of a mortgage over a long period, namely ten years minimum. But, during this period, it may happen that the owner plans to resell the property in question. If the repayment of the mortgage is still in progress, certain clauses of the credit agreement prohibit this sale.
Is repaying a credit obligatory in the event of a sale?
The owner can decide to sell his property, whether it is the subject of a mortgage. Often, such a decision is taken without the loan being definitively paid. For this reason, banks and lending organizations provide for this possibility before entering the mortgage contract.
Several hypotheses can be considered:
- They pledged the house to get a loan:
Here, the house is used as collateral in order to get a loan. The funds got are used for another use (purchase of a car, financing of a rehabilitation, constitution of capital, new acquisition of land or other real estate). I can only put the house up for sale if:
- I repay the loan
- The pledge is lifted,
- I have made a release
- I gained the house on loan request.
In this hypothesis, there are two possibilities: the house is mortgaged or not mortgaged. With a mortgage, the repayment of the credit is obligatory. This is then an early repayment. Credit transfer could also be a solution if they stipulated it in the loan agreement.
Early repayment
The early repayment of a loan consists in paying in one go the capital remaining because of the lender. They must make this payment before the reimbursement period expires.
Prepayment releases the creditor from any commitment to the lender. Remember that the monthly payments also include the interest calculated according to the period considered. During an early repayment, the borrower no longer pays the interest on the remaining monthly payments. Only the part of the capital not yet paid is to be reimbursed.
There are two types of prepayment:
Total reimbursement
Total repayment comprises paying the entire loan corresponding to the outstanding capital. They can trigger the early repayment following the sale of the real estate or following a renegotiation of credit. A credit renegotiation is the liquidation of the current credit in order to negotiate a new credit. A loan that will finance another acquisition.
Partial reimbursement
A borrower with liquidity and wishing a readjustment of monthly payments can submit the revision of his loan contract. Here, the aim is to be granted a partial refund up to the amount that the interested party has.
This approach leads to a decrease in the amount of monthly payments. A reduction in the number of monthly payments still to be paid may also result. Warning! The bank reserves the right to refuse this recourse if the amount provided is less than 10% of the total loan (the initial capital).
Transferring a loan
This practice allows the cancellation of an existing loan to contract a new one more in line with the current situation of the creditor. Note that the advantages applied to the current loan will be kept in the clause of the newly concluded contract.
The conditions of the transfer
A transfer request only receives a positive response from the bank if the initial contract clearly mentions it. Thus, before signing a credit agreement, make sure that this clause is included.
Other conditions may also count:
- The cost of acquiring the new house must be at least equal to the balance of the capital to be repaid to the credit institution
- The transfer must concern the same accommodation: principal residence against another .
- The time in transferring the old house and the acquisition of the new one must be short (not over four months).
Benefits of loan transfer
Taking out a new loan after full repayment of an outstanding loan is more expensive than a transfer.
Here are the many benefits that can come from a loan transfer:
- Reduction of costs : certain costs linked to an early repayment are avoidable: penalty costs, notary fees, other administrative costs.
- Less restrictive administrative procedures: the transfer allows a reduction in the administrative procedures to be started.
- Preservation of borrowing conditions, including the initial borrowing rate: the borrowing rate rarely drops. But if so, consider doing a simulation between a new loan and a simple transfer. The simulation will allow you to compare the two operations in order to make the best decision.
The mortgage solution
The mortgage is one condition required in the granting of a mortgage by the bank. In the event of default by the borrower, stopping payment of monthly payments, the bank resells the mortgaged property at auction.
The steps to follow for the sale of a mortgaged property
When a property is subject to a mortgage, registration in the mortgage register is a mandatory step. The inclusion in the mortgage register protects the banker against the sale of the property without his knowledge. Indeed, this approach prohibits the owner from selling his house.
If the owner wishes to resell his assets, he must request the release. This process involves erasing the mortgage from the registry. It is the notary who is in charge of this procedure which costs between 600 euros and 800 euros .
The roles of the notary in the sale of mortgaged property
When the release is got, the notary's role is to collect the funds resulting from the sale of the property.
Then, the latter notifies the buyer's bank so that the sum of money is paid to the correct account. The bank of the notary enjoys the status of beneficiary, since the property was the subject of a mortgage. The owner does not directly receive the fund.
When the sum of money is credited to the notary's account, the latter distributes it. The bank with which the owner has taken out the mortgage has priority in the order of payments.
The notary therefore asks for the amount of the remaining sum to be repaid by the borrower and proceeds to payment. The professional also pays the taxes on the capital gain. This balance will be paid to the borrowing owner.
The deposit solution
The surety bond is another alternative to the mortgage. The latter can jointly, individually or through a surety company.
Bail definition
The deposit is a necessary guarantee when applying for a mortgage to finance the acquisition of a property. There are other types of collateral, such as mortgage or lender lien or PPD. But, the bank prefers the mortgage because they usually assigned the surety to low-risk records for the lender. Some financial organizations and banks have adopted surety systems to avoid registration in trade registers.
Conditions and mode of operation of the deposit
The surety system is a more flexible and simpler process than mortgage registration. This system is best suited to the needs of borrowers. This offers many psychological and financial advantages to the latter.
The surety companies choose and select the bid files and carry out studies on the debtor's solvency. This parameter is more determining than the value of the property or the amount of the loan.
Mechanism of the sale of a bonded asset
When the owner sells his bonded house, he has an obligation to notify the bank. Thus, the institution will be informed of the sale.
As they gained the property through credit, the owner must first prioritize the repayment of his loan. If he intends to buy another, he may consider the credit transfer. To sell his property, he must release it. Rather, it is the notary who releases the surety bond.
To lend money, the bank takes risks to provide money to the borrower. The most effective ways to make sure your money doesn't get lost are through a bond or mortgage.