That’s it we found the accommodation we dreamed of and everything is accelerating! How to take out a mortgage now.
The ideal is to have started the process and know what to expect before looking for the property.
Knowing your debt capacity is essential. It is defined according to your income and therefore you will have a price range for your future purchase. No need to look at a property for 200,000 € if you can only borrow 130,000 € it will save you time and avoid disappointments.
An appointment with your banker will allow you to validate this essential first step, he should also give you important information on the various possible loans (fixed rate loan, variable rate, personal contribution …) but also other types of available credits. and cheap like the 1% employer’s loan.
Here you are in a constructive process, you know what to expect and you have all the keys in hand for your mortgage and the search for your future home can start calmly.
Which offer to choose?
Your plan to become an owner finally becomes a reality, the property that interests you is in the budget that you set with your banker. It now remains to play the competition between the credit offers.
Here are some great tips that can save you thousands of dollars:
-Never limit yourself to your banker’s offer only.
– Go see other banks, you will see they roll out a red carpet for you.
-Keep up to date with mortgage rates charged at the time of your purchase.
-Look at the overall cost of your credit (what you’re paying off in total), don’t just look at the monthly payment.
-Beware of credit insurance, job loss… take the time to compare and find out about coverage and obligations…
You commit over several years and the sums involved are considerable as well as the interest paid!
Modular real estate credit
When you take out your mortgage , you have the option of choosing a flexible option for your mortgage.
This option allows you to revise your monthly repayments upwards or downwards according to the evolution of your resources.
A flexible home loan will allow you to adjust your monthly payments to your economic situation by varying the duration of the loan. For example, if you encounter financial difficulty, you lower your monthly loan payments by extending the duration of your repayment.
Be careful in the event of a decrease in the monthly payments of your credit and therefore an extended repayment period, the interest repaid will be greater.
Conversely, if your financial situation improves and you want to repay your mortgage more quickly, you have the possibility of increasing the monthly payments and at the same time reducing the repayment and interest on your loan.
Before taking out a mortgage with this option, it is advisable to check the “range” of possible variation in the repayment of monthly payments, and the number of times and dates when you can make changes to the monthly payment.
What type of rate to choose for a mortgage?
Here are the main options that will be offered to you when taking out your home loan.
1- The fixed rate.
By choosing this formula, you are guaranteed against the vagaries of rates. From the conclusion of the loan contract, you know the monthly repayment installments for the entire repayment period of your loan.
Although the rate is fixed, some banks agree to adapt the amount of repayments according to the evolution of the borrower’s income. However, your fixed rate loan does not benefit from a drop when the rates fall.
2- The variable rate
allows you to benefit from the most advantageous rate of the moment. If subsequently, the mortgage rate drops, the borrower benefits from this drop; on the other hand if the rate increases, the borrower sees his rate revised upwards.
However, to avoid large spreads, banks provide a range of variation that limits both the rise and fall in rates. The most frequent ranges are + or – 2% and + or – 3%.
Supporting documents for assembling the loan files
What will be the documents and supporting documents that will be required of you when setting up your loan file?
Of course, the documents required by the banker to create your mortgage file may vary from one establishment to another, but in general, here is the list of documents that will be requested:
– Tax notice, the last 2
– Pay slips, the last 3
– Account statement, the last 3
– Proof of civil status, identity document
– Family record book
– Proof of address
You will also be asked for proof of the contribution you bring to your project.
Again this is a non-exhaustive list, and other documents may be requested for additional information.
Renegotiate your loan
In which case should you consider renegotiating your mortgage with your bank?
• If the drop in rates between when the loan was granted to you and the current rate, is significant.
In this case, you can request either a reduction in the duration, while keeping the same monthly payment, or keep the remaining duration and have a decrease in the monthly charge, or a mixture of the two (lower rate and reduction of the duration). In case of refusal, you can consult the competition.
• If your economic situation deteriorates and the repayment burden becomes too heavy, you can ask your bank to renegotiate your loan.
This renegotiation may relate to the rate (downward) or the remaining repayment period (extension) or to both at the same time. If your bank refuses to review the file, you can turn to the competition.
To find out if you are a winner, do your calculation taking into account the possible costs of the new file and the early repayment indemnities of the credit if you change establishment or renegotiation costs.
Early repayment of a mortgage
You have financed your real estate acquisition with a loan and you want to repay it in advance (inflow of money, sale of the property, etc.)
The borrower can fully or partially repay his mortgage at any time. In general, banks require that the partial prepayment be made on a due date. For full reimbursement it can be done at any time.
Some banks for partial prepayments require that the repaid capital be at least 10% of the original capital (i.e. the amount you borrowed for the acquisition).
The general loan conditions provide, as a general rule, that any early repayment is accompanied by a penalty corresponding to six months of interest on the capital repaid in advance, capped at 3% of the repaid capital.
To remember :
In the event of partial early repayment, you can request
- To reduce the time remaining to run, the monthly payment remaining the same
- To reduce the monthly payment.
Mortgage repayment problem
People who have had recourse to bridging credit to finance the purchase of their new property before the turnaround in the real estate market can find themselves today in delicate situations, even if everything is done with the banks to provide solutions. How to react today to this possible mortgage problem?
-The first solution is to review the selling price of your property downwards, which is never easy to envisage, especially if you go below the price range that you have set yourself.
– Extend the duration of bridging loans, of course by finding your banker a few months before the end of the loan to find an amicable solution, banks can also request a new estimate of the property by a professional before reviewing the sale price .
– Resell or rent to try to repay the mortgage loan in the neck, or resell the new property even if it means recording a loss that will be less than that generated by the bridging loan.
-Reunite the credits: if the debt ratio does not exceed 30%, collect the credits even if it means extending the duration of the loan.
-Sell before buying is the best way to avoid bridging credit problems.
Mortgage
The repayment of a mortgage loan is guaranteed by a mortgage on real estate.
A mortgage is a right granted to a creditor (for example a bank) on a property (or exceptionally on a movable property similar to a building such as a ship) as security for a debt, without the owner of the property which constitutes the guaranteed to be dispossessed.
A mortgaged property is property that a creditor can have seized if the debtor does not fulfill the principal obligation (for example the installments are not paid), in order to put it up for sale, and to be repaid by preference on the selling price.
A mortgage is taken through a notary in civil law jurisdictions. It is registered in an official register.
The mortgage is used to guarantee the payment of a debt contracted on new or old real estate.
The MURCEF law
Anyone taking out a mortgage must take out loan insurance. However, the borrower is not obliged to take out insurance with the organization granting the loan.
The bright side is that often the credit companies that advertise the lowest interest rates on their loans are also the ones that provide the most expensive loan insurance. Hence the importance once again to compare a loan offer as a whole with its TEG and the amount of monthly repayment at comparable maturity over an equivalent loan period. If the bank imposes borrower insurance (and this is generally the case), it has a duty to notify in its loan offer that the subscriber can take out equivalent insurance with another insurer.
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