The repurchase of credit is a current operation which consists in having repurchased a mortgage or consumer loans in progress by a third body. The repurchase of credits for seniors is a similar operation, but adapted to the seniors. By playing on competition, senior access to a more advantageous borrowing rate.
He then recovers financial room for maneuver despite the drop in income linked to his retirement.
How does a credit buy-back for a senior person work? What are the benefits and limitations due to age? Is there a difference between a repurchase of credit for a senior owner and a repurchase of credit for a senior tenant? Can we finance a new personal project such as a trip abroad or home improvement work through an offer to buy back retired credit? Before embarking on this operation, it is essential to take into account its ins and outs.
Why buy back credit at retirement?
The procedure for buying back credits consists of consolidating all its loans to merge them. Result: there is only one loan left. The goal is to lower the pressure on monthly repayment deadlines and benefit from a better interest rate.
In return, the duration of the single loan is sometimes extended. Thus, the purpose of buying back retirement credits is not so much to save money as to reduce your monthly payments, possibly restoring your debt ratio to a reasonable and sustainable level (35% to 40%) and increase its purchasing power.
The transition to retirement is a key moment in everyone’s life. It corresponds precisely to a loss of income of around 30%. This shift can be dangerous for retirees in a fragile financial situation or flirting with over-indebtedness.
The advantage of a retiree is that it offers guarantees to lending organizations:
- The amount of his retirement pension is known and stable.
- He was able to accumulate and build up a heritage.
- He no longer has dependent children.
The profile of a senior is therefore interesting for banks which are more easily inclined to formulate an offer to buy back credit.
A repurchase of senior credit to finance a personal project?
No more active life, make way for the realization of personal projects constantly pushed back for lack of time! But the transition to retirement synonymous with lower cash inflows seems to constrain the range of possibilities.
To plan a trip abroad, initiate development work in their accommodation or participate in the payment of higher education for children, the retiree can always opt for a consumer credit. The catch is that the borrowing rates for personal loans offered are often expensive.
The solution goes through a credit buyout. Why ? Because it is possible to include cash intended to finance the personal projects of a retired person, all at a more attractive interest rate. You just need to specify it at the time of the transaction to the lender.
This reserve of money is then integrated into the single monthly repayment. The senior no longer has to take out a new consumer loan, and kills two birds with one stone! The additional cash included is then amortized over an extended period and allows expenditure to be spread over time.
Up to what age can you buy back credit?
Age is taken into account in the bank profile study of the borrower. However, this criterion also does not constitute a tight barrier to access to credit. There is no age limit.
A senior borrower can start repaying their maturities up to the age of 75 without problem, certain offers extending this possibility up to 85 years . It all depends on the debt capacity and the repayment capacity of the borrower.
Faced with the lengthening of the lifespan and the endlessly postponed date of retirement age, lending institutions are organizing to offer dedicated products adapted to the specificities of seniors (and even pre-retirees ). Senior credits can even be repaid with loan ends fixed at 95 years .
So, theoretically, a loan buy-back can be a recourse to 69 years for a loan term of 25 years! However, there is a distinction between a senior tenant and a senior owner. The latter offers higher guarantees by owning real estate. He can hope to take out a mortgage loan up to 96 years, against only 85 years for a tenant borrower.
In fact, the vast majority of insurance contracts offered by banking organizations offer coverage up to the insured’s age 70 or 80.
Beyond that, it is advisable to apply to specialized insurers or to resort to other types of guarantees. In particular, it is possible to opt for the pledge of a savings contract (life insurance, term account, savings plan in action, etc.).
A second possibility is to take out a credit repurchase for senior over a short period without taking out borrower insurance. Please note, however, in the event of death, the heirs will be liable for uninsured debts.
What are the costs to anticipate for a repurchase of credit for retirees?
For loan consolidation to be advantageous, focus should not be solely on the borrowing rate but on the overall cost of the transaction. In fact, buying back your loans entails costs:
- the application fees to be paid to the new lender;
- the early repayment indemnities (IRA) payable to the lending organization from which the initial credit was taken out;
- credit insurance charges ;
- guarantee costs (release of mortgage, pledge, etc.).
For a person over the age of 65, death and disability insurance is a criterion which significantly increases the overall cost of buying back credit. Generally, group contracts of insurance companies cover reimbursements up to 75 or 80 years. But the rates increase with the age and the state of health of the borrower.
The logic is as follows: the more the subscriber ages, the more his medical history accumulates or the risk of developing diseases increases. Once the health forms have been completed and the medical examinations carried out, the senior is therefore faced with sometimes very significant premiums. The solution is to activate the insurance delegation to bring competition into play.
Individualized borrower insurance is thus better suited to the profile of the retiree, especially since senior contracts are now marketed. They cover loans up to 85 years. To obtain the best credit buy-back offer, a simulation allows you to visualize the state of the market and compare the different commercial proposals.
The repurchase of credit for retired tenant
Despite misconceptions, a retired tenant has the flexibility to request a loan consolidation. He can get a single loan by extending the repayment term up to 12 years. This is particularly interesting for senior tenants who are looking to buy consumer credit.
The transition to retirement for a tenant constitutes a loss of income felt more strongly. The weight of revolving loans with high interest rates constrains financial room for maneuver. The repurchase of consumer loans is then used to loosen the grip on the loan charges paid each month.
The request to buy back credits for a senior tenant follows the same procedure: study of the feasibility of the request, submission of the file, response from the lending organization. The bank may ask for guarantees to guard against the risk of non-payment. It can for example demand an assignment on the retirement pension, that is to say that it directly deducts the amount due from the pensioner’s income.
The repurchase of credit for retired owner
The grouping of loans for a senior owner makes it possible to merge consumer credits with a mortgage loan being repaid. The repurchase of mortgage is defined as such when the outstanding amount of the mortgage corresponds to at least 60% of the total outstanding amount of the repurchase of credit. Otherwise, we talk about buying consumer credit for senior.
The senior owner has, by definition, a property portfolio. It therefore presents an interesting and less risky profile for banks. It is all the easier to obtain a loan buy-back in this context. In addition, if the retiree has completely finished paying off his home loan, he can then demonstrate excellent borrowing capacity.
The repurchase of mortgage for retirees
The repurchase of mortgage is distinguished by the fact that it requires a taking of collateral. The operation then corresponds to a repurchase of credits with a mortgage guarantee. The lender covers itself in the event of repayment problems linked, for example, to the death of the borrower.
The management of this request can be entrusted to a non-exclusive agent for the repurchase of credits. The intermediary studies the situation of the senior owner wishing to use a loan buy-back. It reviews income, the rest to live or the debt ratio.
When the feasibility of the project is validated, the retiree loan repurchase request file is sent to the various targeted lending organizations. They make an offer or not. A reflection period of 10 days has been introduced since the Scrivener law, if the request concerns mortgage loans.
Once the signature is affixed, a withdrawal period of 14 days for a consumer credit buyout must be respected. The release of funds is then initiated, once the withdrawal period has ended.