You want to buy real estate or build your home and you need a credit? Faced with the many offers of the market and the proposals and conditions of banks and lending institutions, it is not always easy to navigate and especially to find its interest! Here are the tips of our specialists to know everything about real estate credit.
How to get a mortgage?
Getting a home loan is not always as easy as you might think. As for benefiting from advantageous financial conditions, that's another story! Know that it is imperative to have a solid, viable and reassuring record to inspire confidence in the bank or credit agency before which you present yourself. To better guide you, here are some important elements that must constitute your file.
The personal contribution
Personal contribution is not systematically required, not everyone has it. Nevertheless, an intake inspires confidence and the higher the amount, the more serious your case will be. Your banker will be reassured, because a good contribution proves that you are able to save and commit yourself to pay your monthly payments on time, without difficulty.
The debt ratio
The debt ratio is the calculation of all your monthly payments of credit vis-à-vis your income. Banks and lending institutions systematically inquire about this rate and generally accept a value of up to 33%. In other words, your monthly loan repayment must not exceed one third of the amount of your monthly income. Banks are very demanding with low-income households because of their greater fragility, but they are less demanding with households with high and very high incomes (with a tolerance of 50% of the debt ratio).
Your income and their sustainability
To grant you a mortgage, a banker will require reliable guarantees including stable income throughout the duration of your credit. If you have a permanent job, you will be more likely to be granted credit than someone on a fixed-term contract or temporary. As for entrepreneurs, they can only be granted a loan by justifying higher incomes than a permanent employee. Finally, be aware that if you have been on a permanent contract for several years, your file will be taken more seriously than if you are just starting out; waiting a year or two sometimes allows you to benefit from a more advantageous credit.
Your banking attitude
Before deciding whether or not to grant a home loan, the bank or lending agency will review your banking behavior. If you have difficulties to finish your month ends in the positive despite a lack of rent and credit, your record may not inspire confidence. It is advisable to have sound and monitored finances, and at best an ELP; you are then assured of being taken seriously, listened to and answered.
The terms of real estate loans
The duration of the mortgage
Depending on your debt ratio, you may be forced to borrow on a very long term for lower monthly payments but more expensive credit, or on a shorter period for higher monthly payments but a cheaper credit. The choice is based on your lifestyle and the benefits that suit you most: lower monthly payments to get more money per month, or higher monthly payments to finish paying back your loan sooner.
In most cases, the borrower must take out loan insurance to secure his loan. This insurance allows the bank to be covered in the event of death, illness or disability. In addition, the unemployment guarantee also protects the lending institution in case of job loss.
As for the application fees, they are included in the TEG and do not exceed 1.5% of the cost of the loan. However, try to negotiate this amount with your bank, especially if your file is solid and reliable.
Real estate credit and rate negotiations
Real estate rates keep changing according to years and periods. Nowadays, they are around 2% for an average of 25 years. This currently low rate is interesting and it is therefore preferable and advisable to opt for a fixed rate credit. Indeed, a fixed rate is established at the signing of the loan according to the current market; as a result, when the trend is low, you will be winning. Opting for a variable rate in such a period will only present the risk of the rate going up. A floating rate is interesting when the market is rising, since it allows you to benefit from the variations of the values over the years, often to your advantage. Finally, a cap rate has the advantage of allowing you to benefit from a very low rate during the first years of your credit; it can then increase without exceeding a ceiling that will have been set when signing the contract to avoid unpleasant surprises.
Do not rush on the first offer that will be made to you; compare and negotiate, you will get even more interesting rates. Play the competition, you can only win!