This article will walk you through a real estate loan Consolidation example to understand how the process of loan debt recovery works and how useful it can be.
Here it goes directly to the Consolidation calculator:
Consolidation of real estate loan: initial situation
Here we list the initial circumstances for the application and acceptance of the real estate loan and the subsequent Consolidation.
Persons: 32 and 35 years old, married, 2 children, both borrowers are working
Use of the loan: purchase of a property
Remortgage experience: influences on the original loan
Here are the main points listed that had an impact on the approval and terms of the loan .
Checking the creditworthiness by means of: net income, expenses and other obligations (for example, guarantees for other loans)
Are the employment relationships temporary or permanent? How long are the working conditions, are you still in the probationary period and are you dealing with dangerous professions? (Example would be the construction industry, where there is a high risk of injury and the earnings are often lower due to short-time work in winter)
How is the marital status? Are there children? Are there any maintenance obligations?
All these points significantly influence the assessment of the creditworthiness of the loan applicant! Simplified, one can say here to whom a good credit rating is attributed, which also gets good interest.
With the first receipt of the loan of 124,000 euros came out on the basis of these criteria conditions of 4.25% nominal interest rates and installments of 604.50 euros a month.
Procedure for Consolidation
Appointment with the bank adviser about 2 years before the end of the maturity of the loan to be repaid.
The outstanding balance is then determined for this date.
Answering the question of whether a new rate is desired or whether the old rate should be maintained. If the old rate persists, the term is usually shortened, as the interest on the continuing loan is lower. This automatically increases the repayment share.
Important: If a change of bank should take place, replace the loan so be done by another bank, of course, the new bank must be addressed. In addition, all the above ratings of the credit rating will be made again , which may change the conditions.
The rest of the process, ie the repayment of credit by Bank B of Bank A, is independently regulated by the institutions.
Result of the Consolidation of real estate loan:
In our case, the bank was not changed, it was only used that the fixed interest rate of the original loan has expired, which could be the now lower interest rates applied.
Loan number: 124,000 euros
Rates: 604,50 Euro
After debt restructuring
Loan amount: 109,000
Rates: 500.00 Euro
Duration of the debt restructuring process:
In this case, about 2 months in which the interest rates were regularly observed in order to reschedule at the best possible time . In general, two meetings with the bank adviser are usually sufficient. At the second meeting, the affiliation contract is often signed.
Conclusion on the loan repayment:
In this case, the Consolidation has paid off in any case, you have to tackle the matter only soon enough and of course have a little luck with the interest rate development. In this case, the interest rate fell from 4.25% to 2.31% and the rates were more than 100 euros per month cheaper , while still the remaining maturity could be reduced at the same time.