Which bank to choose for a real estate loan?
All banks can offer a real estate loanbut each applies its own criteria, its level of risk and its grids of interest rate. The choice therefore depends on several elements:
- Traditional banks : personalized support, visibility at head office, comprehensive offers, management of the housing savings account (CEL) or the housing savings plan (PEL).
- Online banks : often more aggressive on the rate, rapid procedures, but sometimes more strict conditions.
- Mutual or regional banks : advantageous for local profiles, proximity relationship.
- Brokers : intermediaries allowing you to obtain the best rate, compare insurance and optimize the overall cost.
At this point, it is useful to perform a real estate loan simulation to compare proposals before committing.
What does the bank check before validating a real estate loan?
Before granting a loan, the bank passes your real estate project under sieve. The main criteria analyzed are:
- Your income and professional stability
Permanent contract, civil servant, established liberal professions: the more stable the situation, the more reassuring the file.
- Your debt ratio
The 35% rule applies: your expenses (including future monthly payment and cost ofborrower insurance) must not exceed 35% of your income.
- Your saving capacity
Have a housing savings account well-fed, a contribution from regular savings or an ability to build up residual savings after the purchase is highly valued.
- Your banking behavior
Repeated overdrafts, payment incidents or excessive use of credit can work against you.
- The quality of the real estate project
Value of the property, location, consistency between price and local market.
- Guarantees
- Mortgage or deposit
- Borrower insurance (death, disability, incapacity, loss of job, etc.). The delegation of insurance (= choosing another insurance than that offered by the bank) is very often less expensive, allows you to lower the monthly payment and sometimes makes the file financeable whereas it was not with the bank’s insurance.
This analysis allows you to precisely determine your borrowing capacity.
How to get a home loan?
To maximize your chances:
- Take care of your accounts during the 3 to 6 months preceding the request: avoid overdrafts, stabilize expenses, avoid agios, repay, if you can, consumer loans and car loans that you may have taken out, etc. In a word, rid your account statements of any trace of operating incidents or excessive charges compared to your income. You will reduce your debt ratio, thus increasing your debt capacity while reassuring the banker.
- Make a personal contributionideally 10% of the cost of the project, excluding notary fees.
- Make several real estate loan simulations to anticipate the monthly payment and the amount of the loan.
- Compare interest ratesborrower insurance and costs (file, guarantees).
- Prepare a solid case : proof of income, savings, asset situation, sales agreement.
A good record makes it easier to obtain an advantageous rate and, sometimes, flexible repayment conditions.
What are the conditions for obtaining a zero-interest loan?
THE PTZ is a credit aided by the State making it possible to finance part of a real estate purchasewithout interest rate. To benefit from it, several criteria must be validated:
- Purchase new housing or an old home with important works.
- Be first-time buyer (not having owned your main residence in the last 2 years).
- Respect the resource ceilings depending on the geographical area.
- Good must become main residence of the borrower.
PTZ can be combined with a classic real estate loan to finance the rest of the project.
How to calculate the amount of your home loan?
THE amount of the real estate loan depends on several parameters:
- Your income and your debt ratio
The maximum authorized monthly payment = 35% of your net income (maximum debt rate set by the High Council for Financial Stability -HCSF-).
- The amount of the personal contribution
The higher the contribution, the larger the bank can accept.
A low rate automatically increases borrowing capacity.
The longer the term, the higher the borrowable amount… but the higher the total cost.
Here is the simplified formula for estimating the maximum amount of a home loan:
Possible amount = maximum monthly payment × coefficient linked to the rate and duration of the loan
(This coefficient is calculated by the bank according to a complex mathematical formula and includes the number of monthly payments.)
Hence the interest in using a real estate loan simulation to obtain a reliable result (these calculation elements being automatically integrated into the simulator).
When and how to renegotiate your home loan?
It may be interesting to renegotiate your credit when:
- THE interest rate of the market fell by at least 0.7 to 1 point;
- you are still in the first third of repayment (period when interest is highest);
- your financial situation has improved.
Two options are then available to you:
- Internal renegotiation with your current bank: simple, inexpensive.
- Home loan repurchase with another bank: higher fees but potentially significant savings.
It is also possible to take advantage of this to adjust theborrower insurancewhich can significantly reduce the monthly payment and the total cost of the loan.
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