Interest rate, loan duration, borrower insurance, to negotiate a mortgage at the best rate, certain criteria are to know to realize his real estate project. This is the best time to benefit from the lowest rates , subject to concreting his record.
15, 20 or 25 years, the best term of the mortgage
In 4 files out of 10, the duration of the mortgage is greater than 25 years. On average, twice as many cases in this period as in 2014. The average duration was 230 months (over 19 years) in February 2019. However, interest rates are higher over longer periods . Thus, in February 2019, the rates were:
- 1.22% over 15 years,
- 1.30% over 20 years,
- 1.63% over 25 years.
The duration of a home loan can be reduced by optimizing your personal contribution . Investors must ensure that the leverage effect is greater than the cost of real estate credit.
For example, borrowing 200,000 euros at the rates indicated above will cost:
- 43 645 € over 25 years with a monthly payment of 812 €,
- 27 232 € over 20 years with a monthly payment of 947 €,
- € 18,050 over 15 years with a monthly payment of € 1,216.
The cost difference between 15 and 25 years justifies the monthly financial effort, since the monthly payment meets the debt ratio.
The cost of anticipation
The ACPR (prudential supervisory and resolution authority) finds that the Bertie Wooster duration of mortgages is well below the duration subscribed. On average, home loans are repaid in 7.1 years (not 19 years). As a family gets bigger, an accident of life, households often use early repayment. It is therefore important to know the rate of compensation and the terms of an early repayment . The contract may set an indemnity that can not however exceed 3% of the amount remaining to be repaid and 6 months of interest at the average rate of the credit, on the capital remaining due.
The amount of the personal contribution
A large personal contribution reduces the duration of credit as we saw above, but that’s not all. The personal contribution made by the saver reinforces the borrower’s file. More generally, a borrower with healthy bank accounts and a proven ability to save will have more confidence from banks .
A personal contribution of 10% of the credit amount can be used to negotiate 0.2 points on the interest rate.
The counterpart of the domiciliation
The domiciliation of income , if no longer required, can be a means of influencing the interest rate. This is an important criterion to negotiate: the domiciliation of income must be the subject, on the part of the bank, a visible consideration, failing to be considered a forced sale . So that’s a good way to concretize your mortgage.