Buying a property: how to optimize your chances of getting a loan

The unstable international political climate, the supply of raw materials that can be unstable, the construction of new buildings with difficulty, Covid preventing visits to properties for sale … nothing seems to affect the appetite of the French for real estate. ! Driven by a desire to expand telecommuting, the individual housing craze in the old real estate market seems to continue – even if it stabilizes – and prices in general continue to rise – apparently due to the scarcity effect on the entire old real estate market. .

But once the “TO” is found and the sales contract or booking agreement is signed, it is a race against time: the prospective buyer must complete the financing within the allotted time, typically around three months, before signing the actual sales contract. sale at the notary.

Brake

In this regard, banks have become more strict and attentive when studying mortgage dossiers. This attitude is reinforced by measures taken by the High Council for Financial Stability (HCSF) on borrower debt ratios, which make accessing credit more difficult, if not impossible, for many households.

The amount of savings requested has risen sharply and varies from institution to institution. Thus, at least 10% of the amount of property is requested as a personal contribution, and this amount can increase up to 20%.

Moreover, thus anticipating the results of the energy audit by several months, some banks appear to be already demanding the savings left after the operation, savings which, therefore, will not be invested in the project from the very beginning, but which must be used to finance work related to improving the energy efficiency of housing, and therefore added to the savings requested for a loan.

Moreover, it would seem that the remaining life (which, in particular, could allow borrowers to cope with a possible increase in costs associated with energy and/or fuel consumption) now constitutes an essential criterion for issuing mortgage loans. “survivor” is explicitly excluded from the HCSF recommendations, which no longer takes it into account when assessing debt levels.

Finally, since the beginning of 2022, mortgage rates have risen. The rates for the best profiles are also rising, while remaining attractive no matter what. While usury rates only change quarterly, which deprives many households (mostly first-time buyers, but not only) of access to finance to purchase their property: this is what we call the “scissors effect” between the annual interest rate and the depreciation rate.

Make a personal contribution

As you have already understood, a lending institution requires an increasingly significant personal contribution to edit a loan proposal. This is equity financing of property, which occurs at the expense of the “own funds” of the borrower. It should also be noted that the larger the personal contribution, the lower the loan rate …

Naturally, a personal contribution usually consists of your savings from your savings. It may also consist of family donations, inheritances…

And it is important to note that savings books related to real estate and some subsidized loans may be considered by banking institutions as a form of personal contribution! Indeed, the amounts of government-subsidized loans (Zero Interest Loan or PTZ), home savings loans from CEL or PEL, and Home Construction Loan (formerly called “1% Employer”) or any other means-tested subsidized loan ( issued by departments or regions, for certain government officials, etc.) represent your personal contribution.

Insurance delegation

Playing on credit insurance is also leverage. This is a contract required by a bank that imposes it on any mortgage borrower to cover the mortgage loans it makes, and which it usually includes in its loan offer (bank agreement). This insurance is not only a guarantee for the lender (much like a mortgage, a deposit, etc.), but also the main protection for borrowers (allows them to cope with the repayment of their loan and keep property financed in death or disability).

According to France Assureurs (the former French insurance federation), the borrower insurance market in 2019 amounted to 9.8 billion euros, including 7 billion for mortgages alone. Insurance delegations occupy a stable position in the mortgage market, around 15%, or 1.132 billion euros of premiums in 2019. A consequence of the ultra-dominant position of bank insurers and a dividing line that has remained virtually unchanged since the introduction of the first Lagarde law – opening up the possibility of insurance delegation in 2010.

However, the borrower’s insurance can be up to 25% of the total cost of the loan. Therefore, it is an important leverage for reducing the overall cost of his loan and thus his annual interest rate.

The borrower’s insurance offer is published by banks simultaneously with the loan offer. This is a group agreement. Collective insurance associated with a loan is carried out by a credit institution in favor of borrowers. This is a standard offer based on the principle of risk pooling (meaning that the risks are shared among all borrowers who have entered into a group insurance contract). Although it offers benefits for the borrower (membership formalities are simple), this offer is not personalized. On the other hand, Borrower insurance offered directly by insurers – individual or collective prudent insurance contract other than that entered into by a bank, called “insurance delegation” – applies personalized and therefore more competitive rates if the borrower’s profile poses little risk (young, in good health, non-smoker , with a good professional education).situation, etc.).

The Lemoine Law, which came into force on June 1, 2022 for new loans (from September 1 for current loans), simplifies, in particular, the conditions for terminating group insurance and allows the borrower to terminate the contract at any time, including after the 1st years to take advantage of insurance delegation. Therefore, he will no longer have to wait for the anniversary of the contract.

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call broker

Thanks to the “mortgage loan directive”, an individual mortgage broker has the opportunity to accompany you throughout your approach and two consecutive missions: the first consultation mission, paid in fees, regardless of the loan; and a second support mission, paid by the bank in the form of commissions upon obtaining a loan. The main difference between these two methods of remuneration (besides “who” pays the broker directly: the borrower or the bank?) is that the remuneration in the form of commissions is not taken into account when calculating the annual interest rate!

Finally

In conclusion, we can remember that the situation is tense for some households seeking property financing, and if there is no miracle solution, the accumulation of actions can help to stay below the depreciation rate threshold and, above all, optimize the purchase. the power of the borrower by limiting his level of debt. Finally, let me remind you that the broker acts on behalf of its clients (companies or individuals). Its role is to determine the product that best suits the needs of its customers. He has a duty to give advice.

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