In the context of a divorce, a separation or a succession , the property in joint ownership can be at the heart of all the discussions. However, for one of the protagonists to become the sole owner of the premises, the solution is, for him, to buy the shares of others. This is the principle of redemption …
What is a redemption of cash?
The term “cash” refers to compensation paid by one party to another, in the context of a sharing or exchange. By extension, in the real estate sphere, the redemption of the balance refers to the redemption of the real estate portion of the other owner (s), in order to allow this buyer to keep the property for his own use.
In the case of a divorce, either one of them gets full ownership of the property, or both parties decide to sell it. For an estate, the principle is the same – the only difference being that there may be more owners to fit into the calculation equation.
How is the calculation of shares calculated?
The amount of the redemption of the balance is fixed, either amicably between the different parts, or by a notary. Relatively simple, the calculation consists in determining the net value of the good (value of the good, minus the principal remaining due on the loan) then to distribute it according to the contribution of each one at the time of the purchase.
For example, in the case of a divorce, after a marriage under the regime of the community reduced to acquests, for a house worth € 200,000, of which there remains € 60,000 of capital remaining due, the amount of the balance will be 70 000 €: (200 000 € / 2) – (60 000 € / 2) = 70 000 €. In other words, the person wishing to keep the house will have that sum to the other.
In any case, the redemption of balance is an operation which requires the drafting of a notarial act called “liquidation” .
What is the “redemption of cash” financing transaction?
Once the amount of the balance has been calculated, the spouse who redeems the share of assets will also have to pay the outstanding capital.
Like any buyback operation, the associated fees must be added: the prepayment penalties, the new guarantees (surety or mortgage) and the notary fees, varying between 7 and 8%, for an old property.
This financing operation comes up against the rules of credit acceptance. That is, the repayment capacity of the borrower will be studied.
Although, in general, the redemption operations are appreciated by the banking institutions : constituted around a real contribution, often consequent, the risk share remains more measured than with a conventional loan, it should be remembered that the repayment of cash often occurs in the context of a separation or divorce.
Also, in this context of emotional charge, it is strongly advised to rely on the good care of a credit broker who will enlighten you on the amount of the balance and who will negotiate for you from his banking partners the best conditions of funding.