When you want to buy real estate, using a bank loan is often inevitable. Banks generally require a minimum deposit to grant a home loan. But what are the criteria and conditions to be met to obtain this famous loan?
First of all, it is important to understand what a minimum intake is. This is the amount of money that the borrower must bring personally in order to complete the amount of the property loan requested. This contribution is often expressed as a percentage of the total amount of the real estate purchase. Banks ask for this for several reasons. On the one hand, this makes it possible to reduce the risk of default by financially committing the borrower to the project. On the other hand, this offers a guarantee to the bank in the event of resale of the property.
To determine the amount of the minimum contribution, banks take several criteria into account. The first criterion is that of the debt ratio. Indeed, banks will study the repayment capacity of the borrower based on their income and expenses. The lower the debt ratio, the higher the chances of obtaining a home loan without down payment.
Another important criterion is that of professional situation. Banks grant a mortgage loan more easily to a permanent borrower than to a self-employed or temporary worker. Indeed, employment stability is a guarantee of security for the bank. If the borrower is in a precarious professional situation, the banks can then request a larger contribution.
Family situation is also taken into account when granting a property loan. If the borrower is married or in a civil partnership, the banks will take the spouse’s income into account when calculating the minimum contribution. Thus, if the spouse has a high income, this can make it possible to reduce the amount of the contribution requested by the bank.
Finally, the bank will analyze the overall financial situation of the borrower. It will take into account other outstanding credits, possible bank overdrafts, recurring monthly fees, etc. The healthier the financial situation of the borrower, the higher the chances of obtaining a loan without down payment will be.
It is crucial to emphasize that each bank has its own criteria and conditions for granting a real estate loan. It is therefore recommended to take advantage of the competition and compare offers before committing to a particular bank. The help of a broker can also be valuable to support you in this process and allow you to find the best offer.
The role of guarantees in granting a real estate loan
In addition to the traditional criteria mentioned above, it is essential to understand that the bank always seeks to protect itself against the risk of non-repayment of the loan. One of the ways for the bank to secure itself is to require a guarantee from the borrower. Let’s delve deeper together into this aspect, often left aside, but just as crucial in the borrowing process.
The guarantee is, in a way, a safety net for the bank. In the event of default by the borrower, the bank can turn to this guarantee to recover the amounts owed. Several forms of guarantees can be considered, ranging from a personal or mutual guarantee to a mortgage on the property.
There mutual guarantee is a form of guarantee where a surety company agrees to repay the loan in the event of default by the borrower. This option is particularly popular for its flexibility and simplicity of execution. However, it has a cost, often perceived as an initial contribution, then partially reimbursed at the end of the loan.
L’mortgage, for its part, is a real guarantee. This means that the bank has the right to seize and sell the property if the borrower does not meet his repayment obligations. Although this option is reassuring for the bank, it is often perceived as more restrictive for the borrower, due to the associated costs and the cumbersomeness of its implementation.
There is also the money lender privilege (PPD), less expensive than the mortgage. It only applies to acquisitions of existing property (and not to construction) and offers the same right of seizure to the bank.
Banks may also take into account other tangible elements as collateral, such as personal savings or financial investments. Having substantial savings or diversified investments can strengthen the bank’s confidence in the borrower’s ability to manage their finances.
The impacts of the loan duration on your real estate project
Beyond guarantees and contributions, the duration of the loan is a determining element in a bank’s financing decision. It influences not only the amount of monthly payments but also the total cost of your loan. Let’s dissect this aspect and see how it can shape your real estate project.
The repayment duration is directly correlated to the amount of monthly payments. A long duration allows you to reduce the amount of monthly payments, thus making the loan more bearable on a monthly basis. However, this also means that the borrower will pay interest for a longer period, thus increasing the total cost of the loan.
Conversely, a short term implies higher monthly payments, but the total cost of the loan is often less expensive. This is a crucial point for borrowers wishing to minimize the cost of their financing in the long term.
The choice of duration is not just a financial question. It is also strategic. A long term can, for example, be considered for first-time buyers who anticipate an increase in their income in the years to come. A short duration may be preferred by people approaching retirement or wishing to quickly free their property from any burden.
It should also be noted that interest rates vary depending on the duration. Long-term loans generally come with higher rates than short-term loans. This variation is explained by the increased risk that the bank takes by committing over a prolonged period.
