Have you finally found the property you want to buy, or simply know the budget allocated to your property project? Now is the time to approach banking institutions to find the best mortgage.
But for this, there is no secret, the comparison of mortgage offers is decisive. How to compare well to take out the credit that will commit you over many years? We take stock of this file, reading it will be of great help if you decide to do without the services of a broker.
Online mortgage simulators are just indicators
While an online comparison tool will be an excellent starting point, it is only an indicator. In other words, it will be useful for putting the borrower in touch with the banking establishments most likely to finance his real estate project.
On the other hand, if the rates mentioned during the comparative study allow you to have a fairly precise idea of the conditions to which you can claim, they do not in any way bode well for a definitive loan offer. It is only after having approached several banking establishments and requested several editions of loan offers that you will be able to compare them.
For this, certain points must be studied with a magnifying glass by you. Each is important and the bank interest rate is not everything. Your final choice will therefore depend on your objectives: maximum savings, maximum flexibility or even a mix of these two criteria …
Compare the total cost of the mortgage
The total cost of the mortgage depends on many components. Get to know them to better understand them …
The nominal rate
The rates granted in the context of a mortgage are in the majority of cases fixed ratesbecause credit terms are long. As a result, variable rates are rarely used by borrowers.
Expressed as a percentage, the nominal interest rate is simply the market rate which the bank borrows, plus a commercial margin. However, the nominal rate is regulated by law and must not exceed the wear rate.
In short, the nominal rate, by itself, is not representative of the sums you have to pay to the bank. There is therefore no need to dwell on it too much.
The APR annual percentage rate
Here is a much more interesting indicator than the previous one. The APR covers several elements, namely the nominal credit rate, but also the amount of all ancillary costs: bank file costs, guarantee costs, costs due to intermediaries (real estate agency, broker, notaries, etc.), insurance costs.
The administration fees are taken by the bank in return for its work, depending on the time spent studying your loan file and therefore its complexity. They can be negotiated and are not systematic.
The warranty fees are those linked to the payment of the loan to the bank in the event of default by the borrower. In practice, it is most often a guarantee (lower costs), sometimes a real estate security (mortgage or privilege of lender of money) and more rarely a pledge.
The fees due to intermediaries may consist of payments to be made to a real estate agency or to a broker (whether for the bank loan or loan insurance). They are of course only due if you use their services.
The notary fees consist of the remuneration of the notary, deed costs and registration fees. They generally represent between 5 and 10% of the amount of the property depending on whether you buy new or old.
The insurance costs correspond to borrower insurance, also called mortgage loan insurance. In 99% of cases, the bank will require this insurance, intended to cover you at least in the event of incapacity, disability or death.
The TAEA effective annual insurance rate
The TAEA is already included in the APR. Consequently, it is not useful for comparing mortgage offers overall. On the other hand, it is useful for you compare borrower insurance.
In fact, mortgage loan insurance can be taken out on a delegation basis, that is to say with an organization external to that offered by the bank. Comparing the TAEAs of different insurers is useful for backing the best loan insurance against your mortgage. A lower TAEA will naturally lower your APR.
In conclusion : the APR of a loan offer allows you to estimate the overall cost of your mortgage. This is the determining information that should guide you in choosing your loan offer from a purely economic point of view.
Compare the flexibility offered by home loan offers
You have been able to compare the APRs offered by different banks as part of a mortgage offer. If they tell you which financial institution is the cheapest, they don’t tell you which institution is the most accommodating …
The modularity of the mortgage loan offer
You borrow at a given moment T a sum which commits you over several years, even several decades. Loan deadlines are determined by your ability to repay, but you can’t be sure what your situation will be like 5, 10, or 15 years from now.
Thus, a so-called modular loan, the name of which varies depending on the bank, allows you to review the amount of your monthly payments, upwards or downwards. In other words, it adapts to the borrower according to his needs:
- Amount of deadlines revised downwards : loss of job, long illness or unforeseeable event can lead you to reduce your monthly payments, if this increases the duration and the cost of your credit, you can nevertheless face the vagaries of life more calmly
- Amount of maturity revised upwards : new job, increased income, departure of children can increase your repayment capacities, by increasing the amount of your payments, you lower the duration and the cost of your credit
Read your home loan offer and the conditions requested for the modularity of your credit to compare the different offers objectively.
Postponement of deadlines
Like the modularity of the loan offer, the postponement of deadlines entails costs, but allows you to take a break in the event of a hard blow. Either you only have the interest to pay, or all of the maturities are deferred.
Obviously, this mechanism increases the cost of credit and its duration, but can help break the deadlock. Check the conditions of your loan offer, the deferral can be partial or total and cover a single month or a whole year.
IRA prepayment indemnities
IRAs are compensation owed to the bank if you want to prepay your loan. This desire may result from an inflow of money, a move leading to the sale of the property or even a mortgage repurchase.
IRAs are negotiable, but it is increasingly difficult to get them canceled outright. However, they must be part of the negotiation, especially if your loan offer does not mention modularity or extension of deadlines.