The history of loans, especially non-cash loans, is not well documented. It is generally believed among financial historians that borrowing one type of commodity existed against another thousands of years ago. However, collateralised loans from banks only became commonplace in the past hundreds of years.

Mesopotamia, Greek Aunt Pollyand and Rome

The oldest written loan contracts date more than 3,000 years ago to Mesopotamia. The remaining contracts sometimes refer to interest and a functioning credit system, but not necessarily collateral in the modern sense.

The first forms of collateral were most likely Aunt Pollyand indentured loans, with poor workers borrowing against the promise of their services. It is also likely Aunt Pollyand that in many cultures slaves became a form of collateral. Borrowing with labor was common in ancient Greek city-states, especially in temples.

Wealthy landowners and feudal lords used their property and land as collateral to borrow money during the Roman Empire. Other citizens can make use of a form of secured loans by offering one or more items for borrowed funds. An additional fee was charged for longer loan periods as a type of interest. Once the agreed period was over and the funds were repaid, the borrowers could pick up their secured items.

Interest rates, however, grew exponentially as the lending of small businesses to politically linked elites expired. The abuse of the lending practices during the last years of the empire led the Catholic Church to denounce the practice of usury in the fourth century.

Despite the attitude of the church, contractual loans were common in Europe up to the nineteenth century. Perhaps the most extreme collateral ever pledged was offered in 1824. The then revolutionary Greek forces, fighting for independence from the Ottoman Empire, offered the “whole of the national property of Greek East Pollyand” as a promise to the holders of all obligations. Although it may have been the largest pledge guarantee ever, GreekAunt Pollyand has failed to receive those loans after winning independence.

Bank loans

The first bank loans and systematized collateral obligations occurred in Italy, where merchants established stalls in local markets. The term bank came from the Italian word “banca”, which refers to banks on which lenders would sit.

Modern concepts of pledging the asset purchased as collateral, such as secured mortgages, were probably less common until banks could develop reliable borrowing and property tracking systems.

Business Lending and Credit Collateral

s for collateralised consumer products appeared in the United States in the late 1860s. Businesses such as furniture, diamonds, houses and admission tickets were borrowed assets in ‘movable property’.

TermijAunt Pollyoping became an important part of the sewing machine market in the US in the second half of the 19th century. The practice held fast. A 1899 study from Boston dealers found that half were already selling in installments.

Credit sales were also crucial for the automotive industry. The first Model T cars from Henry Ford could cost half an annual income. In 1924, 75% of all car sales were made with creditworthiness.

 

Although many homeowners are familiar with the ability to refinance their mortgage, not all homeowners understand refinancing loans. This may be because not all lenders are rearranging or re-debiting, and not all borrowers are eligible. However, the process can save you money in two ways: by reducing your monthly mortgage payment and letting you avoid refinancing costs.

In short, a loan rescheduling means that while your interest rate and loan term remain unchanged, your monthly mortgage payment will be lowered to reflect your current current credit balance. For example, if you use a 30-year mortgage for six years, after rewriting your loan, you still have 24 years to pay it off. For rescheduling to work, lenders need an additional lump sum to reduce your balance. The amount of that extra payment influences how much you can save with a loan rescheduling. However, instead of rescheduling, you could pay a lump sum to your existing loan, which would lower your balance but not reduce your monthly mortgage payment.

How loan restructuring works

Loan rescheduling can be useful if you inherit money (or receive a substantial Jerome Golays bonus at work) and want to apply this to the balance of your mortgage. Because you lower the balance before the schedule, you ultimately pay less interest. This then allows lenders to reschedule your loan or to recalculate your monthly mortgage payment.

Individual lenders have different requirements for rescheduling loans. For example, some lenders require a lump sum of $ 5,000 or 10% of the loan – which is larger – to reduce the balance before someone is eligible for a loan rescheduling.

If you have a $ 400,000 mortgage for 4-year 4% interest, your monthly principal and interest payments are $ 1,910. If you pay the loan for 10 years, your remaining loan balance would be $ 315,136. A lump sum of 10% of the remaining balance of the loan would be $ 31,554, bringing the balance to $ 283,582. In this case, the monthly payments would fall to $ 1,718. However, keep in mind that while saving $ 200 a month on your mortgage payment is a rewarding goal, you have also spent a substantial amount of cash on Jay Gatsbyijk to achieve that reduction in payment.

Of course, lenders charge a small fee for rewriting loans, which is often as low as $ 250.

Determination of suitability

Loan rescheduling is permitted on conventional, compliant Fannie Mae and Freddie Mac loans, but not on FHA mortgage loans or VA loans. Some lenders rearrange jumbo loans, but consider them on a case-by-case basis.

To be eligible for a loan rescheduling, you must be aware of your loan payments and have the necessary cash to pay your principal balance. A credit check and an assessment are not necessary.

Advantages of loan rescheduling

1. Reduced payment. By rearranging your loan, you can reduce your cash flow without the costs of a home refinancing, for which you have to spend no less than 6% of your loan. In some cases, the amount that would be spent on the refinancing could be used to lower your balance sufficiently to qualify for a loan rescheduling.
2. No assessment required. Unlike with home refinancing, a loan review does not have to be assessed. If your property has fallen in value, you may not be eligible for refinancing, since most lenders only refinance a home with a minimum of 5% to 10% equity.
3. No credit check required. Loan reschedules generally do not require credit approval. If you have credit problems and cannot qualify for a refinancing, you may still be eligible for a loan rescheduling.

In a specific case, rewriting loans can be particularly beneficial. If you are a homeowner who purchased a new home before selling your current home, you must temporarily pay two mortgages. Once you have sold your previous home, you can use the profit from that home sale to pay your loan balance and rearrange your mortgage to make payments more affordable. Many homeowners have deliberately chosen to use a loan revision for this when moving from one house to another. Remember that you usually have to wait 90 days after your loan goes to a settlement before you can reschedule it.

Disadvantages of Loan Reordering

Before you reschedule your loan, it is wise to evaluate it in the context of your entire financial plan. Some of the disadvantages of rescheduling loans are:

1. Connect cash. If you have a lump sum of cash, make sure that paying your mortgage is the best use of that money. For example, if you have a high credit card debt, you absolutely must pay it first. If you miss an emergency savings fund or have to reserve money for other expenses, it is best to give Jay Gatsbyijk that you do not go all the way to paying off your mortgage.
2. Does not lower the mortgage term. You should also consider rescheduling the loan in the context of your retirement. Many older homeowners hope to pay off their mortgage before they retire. However, rescheduling the loan will not shorten your term, although this could improve your cash flow. If your goal is to reduce your mortgage debt, switching to biweekly mortgage payments or simply paying your principal sum extra may be a better option than rescheduling a loan.
3. Does not lower the interest rate. If you pay a high interest rate, refinancing can be a better option. A lender can compare the costs and monthly payments of a refinancing and rescheduling of the loan to determine which suits you best.

Last word

Rewriting a loan is not for everyone, but if you have extra cash, consult your lender to see if this method of reducing your monthly payment is right for you. If you are a homeowner who sells a house and moves to another house, you can very well benefit from a loan rescheduling. Those who own a house with reduced value or have credit problems can also benefit more from a rescheduling of the loan than from refinancing.

What the law says ?

 

The Consumer Code (L312-21, L312-22, L312-23) allows a borrower to repay a mortgage in full or in part.

The bank can not oppose it but has the possibility to apply prepayment penalties and set a minimum amount if you partially repay your loan.

Note that the amount of compensation applied must be included in the loan agreement.

Calculation rules

These expenses generally correspond to six months of interest without being able to exceed 3% of the outstanding capital appearing in the amortization table at the moment of the settlement, in application of articles 1152 of the Civil Code and R312-2 of the Code of the consumption.

The amount retained by the bank must be the amount most favorable to the borrower.
In addition, the minimum value of the amount reimbursed is most often set at 10% of the initial amount of the loan, except for the balance.

Numeric example

Let’s assume that you took out a mortgage loan of 120,000 euros on 1 June 2008 for a period of 20 years at a fixed rate of 4.5%. On October 1, 2011, following a receipt of cash, you decide to allocate the sum of 15,000 euros to the partial refund of your credit.

Calculation based on six months of interest

The bank will therefore apply the rule of calculating partial repayment penalties set in the mortgage loan agreement, ie six months of interest:

€ 15,000 X 4.5% X 6/12 = 337.50

Calculation of the fee limit

In accordance with article R312-23 of the Consumer Code, compensation is capped at 3% of the amount reimbursed:

€ 15,000 X 3% = € 450

In this case, the penalty is less than the ceiling set by the Act. The bank will therefore retain € 337.50 to the borrower.

Can we negotiate with the bank?

First of all, it is important to note that banks are increasingly reluctant to grant a fee waiver if the loan is settled early, which does not mean that we should not try to negotiate them.

If the discussions fail, you can try to make a counter-proposal by proposing to your bank to remove the prepayment penalties gradually.
For example, offer 3% for the first 5 years, 1.5% for 5 to 10 years and 0 for the next. On the other hand, know that it is likely that it adds a clause excluding the exemption in case of repurchase to the competition.

If you are considering renegotiating your credit with another organization, consider applying for your current bank. It often happens that, in order to keep its customers, the latter exempts the borrower who renegotiates his credit from the same establishment.

This will allow you to compete and compare your bank’s proposal without the indemnities and that of the competition with the prepayment fees.

Exemption cases

Subsidized loans

All subsidized loans such as the 2012 PTZ or the 1% housing loan can be repaid at any time without any fees.

The cases provided for by the Act

The same applies if you have subscribed your credit after July 1, 1999 and if the prepayment occurs on the occurrence of one of the following cases (Law No. 99-532 of June 25, 1999)

• Death
• Job transfer
• Stopping the professional activity

These situations concern either the borrower or his spouse.

Is it profitable to repay an advance loan?

Before opting for the repayment of your mortgage, we advise you to check beforehand if the options of modularity do not offer a more interesting alternative solution, especially to avoid problems in case of plurality of loans (see below) .

Indeed, it is sometimes more profitable to increase the monthly payment of the loan and to invest its capital. This solution obviously depends on the credit rate and the level of return of the proposed investment.

You can do a simulation to see the results in both situations with our comparison tool.

Notify the insurer in case of delegation

If you have group insurance, the bank will directly notify the insurer of the change in the characteristics of the loan. On the other hand, if you have opted for a delegation of insurance, it is up to you to think about informing the company of the modification made.

To change the insurance premium, you will need to provide:

• The new amortization table in case of partial refund
• The bank loan repayment certificate if you pay it in full.

Multiple loan case

If you have several loans to finance your property, know that the bank has the right to allocate the amount to the mortgage that has the lowest rate.

Thus, if you have benefited from a Zero Rate loan, the latter may legally decide to repay the PTZ priority rather than the main loan, which is obviously not at all your interest.

The French Banking Federation (FBF) has however committed to grant the customer the ability to allocate the reimbursement proportionally to different loans, which is a lesser evil. Again, everything is a matter of bargaining power relationships with your bank.

 

Dare to carry out your projects through the line of financing created through the agreement “Software” between LABORAL Kutxa and the European Investment Fund. It aims to promote the future of entrepreneurs, SMEs and self-employed.

Also, you have the financing in very special conditions to create or consolidate your business.

AUTONOMOUS AND SMALL BUSINESS FINANCING:

• Up to 10 employees
• Up to € 2,000,000 in turnover per year

Funding in special conditions:

• Amount: € 25,000
• Term: 5 years
• Interest rate: 3.40% ITN
• Opening commission:% 1

Financing objective:

• Contribution to self-employment or cooperative or social economy companies.
• Start-up of new micro-companies
• Adaptation of machines, equipment goods, adaptation of offices or factories and commercial vehicles.

For example: At a loan of 20,000 euros for 36 monthly installments, Opening commission: € 200. ITN: 3.40%; UTB: 4.143%; Monthly fee: € 585.16; Full cost: € 21,265.63.

Note: The following are excluded: production and commercialization of arms, human cloning, tobacco, distilled alcohol production, random games, real estate purchase and refinancing.

This financing is supported by the European Union within the framework of the instrument of guarantee established in accordance with Regulation (EC) No 1296/2013 (EU) of the European Union and Council of the European Union Employment and Social Innovation Initiative (“EaSI”).

This financing is funded by the European Union, according to the European Union Employment and Social Innovation Program (“EaSI”) and the European Investment Strategies Fund (“FEIE”) created within the framework of the European Investment Plan. The FEIE’s objectives are to help finance and apply productive investment in the European Union and to make financing more accessible.

Financial support from the European Union, based on the Regulation of the European Parliament and the Council of 1296/2013 (EU), launched by the European Union for Employment and Social Innovation Program (“EaSI”) and the European Investment Strategies Fund (“FEIE”) created within the framework of the European Investment Plan ) in the framework of the guarantee instrument established. The FEIE’s objectives are to help finance and apply productive investment in the European Union and to make financing more accessible.

 

There are those who prepare their real estate project by first making a personal contribution and those whose purchase meets an immediate need, even impulsive, and which do not always have a capital. Here are all the tips for borrowing without capital.

Exact definition of a banking point of view

The personal contribution corresponds to the part financed by your personal funds, that is to say without the assistance of the bank as well as the loans aided by the State, the local authorities or some organizations.

Personal savings

Do not be fooled by the fact that, even if subsidized loans can be used to calculate your contribution, the bank looks first and foremost at the personal funds you invest in the project.
This capital can come from different sources such as:

• Funds deposited on housing savings transactions
• Money available on accounts-titles or savings plans in action
• Savings deposited on bank books such as booklet A
• Amounts from Profit Sharing (1)
• Amounts from profit-sharing contracts (1)
• Donations or money from a succession
• The product of the resale of a house or an apartment
• Homemakers (manual donations or cash advances)

(1) These amounts are unblockable in the case where the dwelling is used as principal residence.

Subsidized loans

Subsidized loans are included in the calculation of the personal contribution, which does not mean that the bank attaches the same importance as for your own funds. Among the best known loans, the loan rate 0 allows the first access to receive additional funding without interest.

Important : Beware, the zero interest loan can not be used to finance notary fees. Either the bank will use another sub-loan or it will use the main loan.

But other credits can be included in this calculation, such as the employer loan, the official loan and the home loan loans, as well as the loans granted by certain mutuals.

Can we buy without input?

The answer is clear: or you can buy your house or apartment without personal contribution, especially if you are a young active. Banks will easily understand that you have just started your professional life and therefore have not had the time to save to build capital.

If, on the other hand, if you acquire your principal residence after 20 years of activity and you do not have a penny in advance, the bank will be entitled to think that you are not a natural saver .

This situation is however to put into perspective, because it is possible that the circumstances forced you to spend your savings (sickness, divorce, cessation of professional activity …). The whole thing will be to explain to the banker that your way of life is not responsible for the lack of personal contribution

Case of the contribution of land as part of a construction

If you own a building plot and decide to have a house built, but you do not have a personal contribution, know that the value of the land will be counted by the bank as a contribution.

It will be based on the purchase price if it is an acquisition or on the amount defined in the notarial deed if it is a donation or a succession or on an expertise if the land to build is in your heritage for many years.

110% financing

When you have no capital, the difficulty is to get a loan to finance the real estate operation itself (the purchase of your house or apartment) but also the so-called fees annexes, that is to say:

• Notary fees
• Warranty fees
• Application fee

This is often referred to as 110% financing (reference to notary fees that were of the order of 10% just a few years ago).

Calculation of the contribution rate and method of calculation

Whether or not you have a personal contribution (including subsidized loans), here are the elements that will allow you to calculate your contribution rate by following the banking methods.
The calculation is made on the basis of the acquisition without counting the additional costs. It will first be necessary to calculate what is called the overall cost of the operation.

Example Nº1

Take as an example the purchase of a house in the amount of € 200,000. Let’s imagine that the borrowers are entitled to a zero-interest loan of € 15,000, an employer loan of € 5,000 and themselves have a capital of € 5,000.

Buying the house	200,000 €	Bring	€ 5,000
Notary fees	€ 14,000	Employer loan	€ 5,000
Warranty Fee	€ 2,500	Zero rate loan	€ 15,000
Fees	1,000 €	Main loan	€ 192,500
Total cost of the operation	€ 217,500	Total financing	€ 217,500

The employer loan and the capital available to the borrowers, ie € 10,000, will be used to finance part of the ancillary costs: 14,000 + 2,500 + 1,000 = 17,500 €. It will be missing € 7,500. The bank will be able to use part of the main loan to compensate for this € 7,500. (The PTZ can not be used to finance notary fees). However, for simplicity, we will ignore this aspect in our calculation.

Formula for calculating the contribution

[(PTZ + LOAN EMPLOYER + CAPITAL) – (NOTARY FEES + GUARANTEE FEES + FILE FEES)] / PURCHASE OF THE HOUSE * 100

calculations

[(15,000 + 5,000 + 5,000) – (14,000 + 2,500 + 1,000)] / 200,000 * 100 =

Result : the contribution is 3.75%

Example Nº2

Now take a second example with the purchase of an apartment for an amount of 150 000 € in the old. Let’s assume that buyers are entitled to a zero interest loan of € 12,000 and an employer loan of € 4,000 and that they have a capital of € 20,000.

Purchase of the apartment	150 000 €	Personal contribution	€ 20,000
Notary fees	€ 10,500	Zero rate loan	€ 12,000
Warranty Fee	€ 2,000	Employer loan	€ 4,000
Fees	700 €	Main loan	€ 127,500
Total cost of the operation	€ 163,500	Total financing	€ 163,500

The total of the personal contribution will be used to pay all the ancillary costs:
10 500 + 2000 + 700 = 13 200 €. It will therefore remain € 22,800 to finance the purchase of the apartment.

Formula for calculating the contribution

[(PTZ + LOAN EMPLOYER + CAPITAL) – (NOTARY FEES + GUARANTEE FEES + FILE FEES)] / PURCHASE OF THE HOUSE * 100

calculations

[(12,000 + 4,000 + 20,000) – (10,500 + 2,500 + 1,000) / 150,000 * 100 =

Result : the contribution is 15,20%

The case of rental investment

From a tax point of view, it is better to borrow the full amount when it comes to a rental investment. So, if you plan to invest in a property tax exemption Act Borloo or Scellier or even in the device Girardin Industrial, the bank will understand that you did not bring any money.

If you have capital, you can consider putting it in pledge of the loan and opt for a credit in fine. This will allow you to deduct more interest and optimize the operation on the tax plan.

Summary table of the elements of the risk analysis

We tried by a simple table to draw a summary of all the elements involved in the risk analysis of the bank. Although this table is only indicative, it has the merit of recalling that the study of a mortgage loan is primarily global, which means that the body will study and weight the result of the analysis of each of the following elements.

We gave a score of 1 to 3 for the importance we give to each element. This assessment is ours and of course each bank has its own appreciation of the files that are transmitted to it.

Personal contribution	1
Quality of account statements	2
Seniority at the employer	1
Career stability	1
Possibility of career development	2
Saver Profile	2
Income level	3
Status of the first-time buyer	2
Savings capacity	2
Risk related to the type of housing	1
The rest to live	3
The debt ratio	3