In order to calculate as accurately as possible the cost of a restructuring operation, it is best to request a study from your intermediary in credit or directly to the banks likely to buy back your debts.
We give you below the calculation elements so that you can simulate different scenarios yourself and allow you to have a first idea of the results you can get if you decide to spread your debts over a long period.
For that we will take the example of a couple with 2 children with 2300 € of monthly net income whose situation before the operation of redemption is the following one:
Situation before restructuring
- 150,000 over 20 years at a fixed rate of 3.30% + 0.35% insurance
- KRD: € 94,140
- Monthly payment with insurance: 890 €
- Remaining duration: 11 years
- Envelope of 1500 € over 36 months, fully used at an APR of: 19.5%
- KRD: 1500 €
- Monthly payment: 56 €
- Remaining duration: 36 months
- Amount borrowed 7000 € over 60 months at a fixed APR of 9.45%
- KRD: 4572 €
- Monthly payment: 145 €
- Remaining duration: 36 months
Loan to finance consumer goods
- Amount of 2000 € over 36 months at a fixed APR of 9.90%
- KRD: 1346 €
- Monthly payment: 64 €
- Remaining duration: 24 months
- Total amount outstanding: 1500 €
- Amount: 500 €
All of these loans represent a monthly charge of € 1155. The couple is in a situation of over-indebtedness with a debt ratio of 50.2%, not counting the bills to settle and the bank overdraft. Suffice to say that the rest to live is clearly insufficient for the 4 people who make up the home. The objective pursued by the couple is threefold:
- Reduce debt to a reasonable level and increase the rest to live
- Settle unpaid debts
- Create a minimum cash flow to compensate for any hard knocks
Before simulating the result , know that a buyback operation generates various costs that will have to be appreciated in our study.
Costs on loans repaid
In most cases, the bank inserts a penalty clause in its loan offer, which generally provides for an indemnity equal to 6 months of interest, capped at 3% of the principal remaining due in the event of early repayment.
Even if you have taken care to negotiate this clause, it is highly likely that the lender has limited the scope of your trading by not applying free prepayment in case of repurchase of the mortgage by the competition . In our example, we will have to pay to the lender: € 94,140 * 3% = € 2,824
If a mortgage has been taken on the property to secure the original loan, you will have to pay a release fee . This operation requires the intervention of a notary and the cost applies to the amount borrowed. It will be necessary to count in our example 770 €.
Note: you have nothing to pay in the case of a mutual guarantee.
It is necessary to distinguish the reserve of money with the other conso loans. Revolving credits can not be subject to prepayment penalties. For other loans, the Act provides for a cap on benefits based on the amount of capital repaid.
Less than 10,000 euros: 1% if the term is more than one year and 0,5% if the term is less than one year.Exceeding 10,000 euros: No compensation. In the case of our borrower couple, there will therefore be no redemption fees, the capital being all less than 10 000 €.
Be aware that the bank can not demand any compensation for the repayment of the overdraft. In case of late penalties on other debts , it is advisable to approach creditors to negotiate amicably. Administrations are very accommodating. Speak to your tax office and let them know what steps you are taking.
For the additional cash flow, we will leave on 2000 €, corresponds to a little less than a net monthly salary.
The fees on the new loan
To the premature repayment of the mortgage, it will be necessary to add the costs related to the subscription of the new loan , that is to say:
Count 1% of the amount borrowed.
We will calculate this item on the basis of a mortgage registration. Unfortunately, this type of guarantee is preferred by the lending institution when the amount is used to buy back the borrower’s debts.
Result after restructuring
Total to borrow: 94 140 € + 2 128 € + 1 500 € + 4 572 € + 1 346 € + 1 500 € + 500 € + 2000 € = 107 686 €.
We will build 3 scenarios over several durations.
|scenarios||duration||Rate (1)||Monthly||Cost||Debt ratio||Monthly gain|
|1||11 years old (1)||5%||€ 1,093||$ 36,679||47.52%||$ 62|
|2||15 years||5.75%||€ 925||$ 58,929||40.21%||$ 230|
|3||20 years||6.65%||$ 843||$ 94,931||36, 65%||$ 312|
(1): Rates are indicative
(2): corresponds to the maturity of the mortgage
We are going on an insurance rate of 0.35% on the borrowed capital.
Namely: a 25-year loan at 8.10% would give monthly payments of € 869 for a credit cost of € 153,221, significantly less favorable than for a loan over 20 years.
The terms of 11 years and 15 years are not adapted to the situation of our couple, because the monthly gain does not allow sufficient deleveraging . It will therefore be necessary to consolidate all debts over 20 years to see the rate close to 33%, which is the norm and the couple will have reached its 3 objectives:
- It benefits from 312 € of rest to live additional
- He liquidates all his debts
- It will end up with a cash advance of 2000 €.