It all depends on the rates, the duration and the distribution of your loans. If one of them spans three times longer than the others, it is not always interesting to have it bought out with the others.
Illustration of a loan buy-back:
A couple with three children earn $ 4,800 in income. Each month, they pay $ 1,336 for their mortgage and $ 1,750 for their various consumer loans. The first still spans 16 years and the second over 2 years.
Today their monthly payments are $ 3,086 and once their credits are paid, they start their month with $ 1,714 to live at 5. They, therefore, wish to redeem all of their credits to have more margin at the end of the month.
Case 1: I redeem all my credits
A bank agrees to grant them new cash of $ 10,000 for their new work and to buy back what they have to repay, i.e. $ 208,548 via a new loan at 3.65% over 16 years. Their new monthly payments now amount to $ 1,639.51 and they can start their months at $ 3,160.49.
Here the operation is interesting because the couple reduces their monthly payments by almost half. However, we realize that the reduction is only effective for two years after which the monthly repurchases of loans are higher than those of the initial mortgage. Payments, therefore, increase by $ 303.51 per month, i.e. $ 50,989.68 more over 14 years.
Case 2: I only redeem part of my credits
The couple are still asking for cash of $ 10,000 but this time wish to combine only their consumer loans. Not wanting to put his property as a guarantee of the operation, the rate is higher. The bank offers them to buy back their $ 37,237 in consumer loans at 4.95% over 6 years. Their new monthly payments, therefore, amount to $ 771.05 or $ 2,107.05 with those of the mortgage.
Here the couple reduces their monthly payments a little less in the short term but their reduction remains very advantageous. After 6 years, he will only have to pay off his monthly mortgage payments.
Comparison of the two loan buy-back solutions
To summarize, here are the two solutions available to the couple:
It is also possible to redeem only your mortgage by taking advantage of current rates in order to reduce your monthly payments or your borrowing period. In this case, the operation differs from the grouping of loans, for more information, see our guide on buying mortgage.
- Reduce monthly payments as much as possible or limit its duration?
- Total or partial buyout?
- How much will it cost to buy back credits?
- Redeemable credits
- Renewable credit redemption
- Renegotiate credit repurchase