The 110% real estate loan, or loan without personal contribution, allows the borrower to fully finance the purchase of real estate through bank credit. The cost of the building, but also ancillary costs, are therefore covered.
The definition of the loan at 110%
First of all, if we are talking about a 110% loan, it is not by chance. Indeed, it is estimated that the ancillary costs of a mortgage represent about 10% of the amount of the property.
They consist of notary fees, agency fees and brokerage fees if they exist, bank file fees, but also guarantee fees (mutual guarantee, mortgage or lender privilege).
These costs are in the majority of cases paid by the borrower’s personal contribution. But not all home loan buyers have this contribution, and some do not want to use it. They therefore request a 110% bank loan.
How the mortgage loan works at 110%
The 110% real estate loan meets strict conditions as to its implementation. Not all borrower profiles have access to it because this type of financing presents an additional risk for the bank.
Indeed, by granting a mortgage greater than the intrinsic value of the property, the banking establishment takes the risk of not recovering all of its deposit in the event of default by the borrower.
To access the loan at 110%, the borrower must therefore present an impeccable record, because his solvency will be scrutinized. Like all other borrowers, he must therefore have the following strengths:
- A stable professional situation: preferably a permanent contract for several years or a civil servant position
- A limited debt ratio: 35% maximum for the acquisition of a main residence, 33% maximum for other types of real estate projects
- Sufficient borrowing capacity: this must cover the entire loan over a maximum of 25 years
- A sufficient remainder to live: this must allow the borrower to cope with the bills of daily life and possible hard knocks
- Good financial management skills: bank account statements without bank charges, without direct debit rejection, are required
With the loan at 110%, the borrower has nothing to pay, everything is financed by the bank and it is the overall cost of credit that is impacted on the rise.
The advantages of the 110% mortgage
Real estate that is fully funded by the financial institution can have many advantages. These will however differ depending on the borrower profile.
The young borrower
The young borrower who launches into the working life can hope to obtain financing at 110% for the purchase of his principal residence. Indeed, it is normal that he did not have time to save and must use his savings for essential purchases such as a vehicle, household appliances or furniture.
If he is on a permanent contract or holder of the civil service, and he has also demonstrated his good banking management, he can attract the favor of banks, even in the absence of personal contribution. Indeed, the latter see it as an opportunity for loyalty.
Objectives sought: preservation of precautionary savings, possibility of acquiring something to start in life on your own funds …
The real estate investor
Here, the borrower wishes to finance real estate with a view to drawing income from it in the medium and long term. He is therefore seeking to finance a rental property project.
He has every interest in resorting to credit at 110% to deduct a maximum of charges and increase his profitability. In addition, the rents expected in return for the investment are likely to reassure the bank when the payment of loan maturities.
Objective sought: profitability and tax optimization
The big saver
The borrower who has many investments and large bank outstandings on passbooks, life insurance, securities accounts or any other investment medium may prefer 110% financing.
Indeed, this one, especially if it is negotiated at a low rate, can return to him financially less expensive than the withdrawal of his savings to convert it into personal contribution. The bank, on presentation of its liquidities, can accept the financing at 110% and even take a pledge as collateral for the mortgage.
Objectives sought: preservation of savings and profitability
The accident of life
Unfortunately, there are life’s vagaries that make some borrower profiles lose everything or almost everything. This may be the case in particular for people who have had to stop working following a long illness, those who have lost their spouse or even those with a disability.
The arrival of such an event could have damaged their savings. When they manage to recover and regain financial balance, 110% financing is a solution to help them access homeownership.
Objectives sought: fresh start and human support
Get your mortgage without a contribution
The essential thing to remember to finance a property at 110% is transparency. If the borrower has a good reason for not having a personal contribution and can demonstrate it to the bank, he will be able to access 110% credit more easily.
However, this type of financing has some disadvantages. It is not granted by all banking establishments, it is more easily refused than a loan with personal contribution and finally its interest rate is generally increased.
To benefit from a 110% loan under the best conditions, using an online simulator to be in contact with banks ready to finance this type of project is a suitable solution, free and without obligation.