A real estate acquisition project requires, most often, to have recourse to a mortgage, whether to finance its main residence, its secondary residence or to make a rental investment.
To be able to navigate and get the mortgage on the best terms, it is necessary to hold certain keys.
What are the elements of a home loan? How to bring about competition between banking establishments? What are the new rules in 2022?
Izicredit presents everything you need to know about mortgages.
The elements of a mortgage?
A home loan is made up of many elements that it is important to know well. It is all of these elements that will determine the cost and conditions surrounding your credit.
The interest rate
It is he who determines the amount of monthly payments that you will have to repay. It depends:
your contribution: the amount you own and invest in your real estate purchase project
of the period you are borrowing. To attract customers, banks must be competitive: they therefore adapt their rates according to the market.
The interest rate can be:
Fixed: It is established by your bank at the time of the loan offer and is the same throughout the duration of the loan. You know the exact amount of monthly payments you will have to repay.
Variable: It is calculated on a benchmark index and may vary upwards or downwards. This variation can be limited (up or down): we then speak of a capped variable rate. With a variable rate, you cannot know the cost of your home loan in advance.
One of the concerns of a bank is to ensure that you can repay it. This is why it studies your profile and only grants you a loan if it is certain that you will be solvent throughout the duration of the loan. To cover their backs, they may ask you to take out borrower insurance that covers the repayment of your credit (totally or in part) when you find yourself in one of the following situations:
This borrower insurance is not compulsory, but almost all banking establishments require it and set the guarantees that you must take out. When applying for a loan, it is important to consider the question of borrower insurance, because it can represent up to 30% of the cost of your credit! You have the option of contacting another insurer than the one offered by your lending institution. And with equivalent guarantees, the latter cannot oppose it.
Like borrower insurance, guarantees are a way for banks to protect themselves from default on your part. They can take various forms:
The mortgage. Contracted voluntarily by the borrower, it is a notarial deed (registered at the mortgage conservation office) which allows your bank to seize your property and resell it to recover the sums due. However, you remain the sole owner of your property.
The IPPD (Registration in Privilege of Lenders of Deniers): Substantially identical to the mortgage, but less expensive, it can only be contracted on properties already built.
The surety. For a home loan, it is generally done by a surety company which acts as guarantor for the bank (example: housing loan). The guarantee can be simple: in the event of default, the bank first turns against the borrower before activating the guarantee organization. This is the whole difference with the joint surety for which, in the event of default by the borrower, the bank turns directly against the surety organization.
Tip: In principle, you can freely choose the type of guarantees that you bring to your real estate project, however you must bear in mind that the mortgage and the IPPD are more expensive than the bond
The study of your file and your borrower profile will take time from your banking establishment, which it does not give you. It charges you a file fee which corresponds to the administrative and day-to-day management of your file. They depend on the cost of your loan and vary between 0.5% and 1.5% of the sums borrowed. But a minimum amount and a ceiling amount are generally applied.
Good to know It is possible to negotiate your application fees, if you have a good borrowing profile: be on a permanent contract, prove your ability to save, have a substantial contribution, present a healthy financial situation (without overdrafts) and present a low debt ratio.
Whatever the term of your loan, you have the option of repaying it early. This corresponds to a shortfall for your bank, which may provide penalties in your contract and a ban on early repayment if it is equal to or less than 10% of the capital borrowed. These penalties are capped:
However, even if these penalties are provided for in your contract, you will not have to pay them if your contract was signed after July 1, 1999 and this reimbursement occurs because of the sale of your home in one of the following cases :
How much does a mortgage cost?
Each real estate project is unique and has a different cost. It is therefore not possible to give an exhaustive answer to this question. The cost of your loan depends on:
- of the amount borrowed
- borrowing rate
- the loan period
- application fees
- the amount of guarantees and borrower insurance
In October 2022, the average rates for a mortgage are as follows according to the housing credit observatory (excluding insurance):