In order to obtain a mortgage under the best conditions, a minimum personal contribution is recommended, especially when the economic and social context is quite uncertain.
So, how much do you need to have to own a home and access a bank loan? We take stock to help you see more clearly.
What is personal contribution?
The personal contribution consists of a sum of money that you inject into your real estate project to cover part of your acquisition. It can therefore correspond to several sources of income.
Indeed, it can be an amount of available savings that you have collected on a simple passbook, the release of funds on a life insurance, a PEL (Plan Épargne Logement), a PER (Plan Épargne Retraite) or the employee savings for example.
It can also be the result of a free or expensive donation from your parents, your children, your family at large or even your friends. The contribution can also come from an estate.
The personal contribution can also result from the sale of a previous property on which you realized a capital gain. You then transfer the funds obtained to new accommodation.
Finally, loans from employers or from certain associations that have signed a housing agreement can also serve as a personal contribution for the bank.
In any event, the purpose of the personal contribution is to cover at least the ancillary costs related to the acquisition of the property (real estate agency fees, brokerage fees, notary fees, bank file fees and possible warranty costs).
Why is the personal contribution required by banks?
Access to 110% loan is increasingly rare. Banking institutions often favor civil servants first-time buyers or investors for this type of mortgage. Otherwise, it is necessary to provide solid guarantees, but these are usually paid and are of limited interest for the bank as for the customer.
For most borrower profiles, personal contribution is therefore closely watched and highly appreciated. Several explanations explain this requirement:
- In the event of default by the borrower, the bank did not finance an intangible amount difficult to recover, but only tangible real estate
- A borrower capable of saving to constitute his contribution shows his seriousness and, implicitly, his capacity to repay his future maturities
To put it simply, a good contribution allows you to access a more attractive banking offer. However, what is the preferred amount of personal contribution?
How much for the personal contribution?
It is customary to say that the amount of personal contribution must be at least 10% of the total budget related to the purchase. It may be slightly lower in the new in particular and turn around 7.5%, or slightly higher in the event of mortgage taking in the old for example and represent at least 12.5%.
But in general, remember that the higher your personal contribution, the greater your chance of accessing the loan. A borrower file is often refused if the contribution is below 10%. Conversely, when the personal contribution constitutes more than 20% of the acquisition cost, your file is very well received and bank loan rates may be revised downwards.
The minimum recommended intake is as follows:
- Less than 10% for a couple of tenured civil servants for the purchase of a main residence
- 10% for a couple with two permanent contracts
- 20% for a couple with a single CDI
- 30% for a single person or a self-employed person
However, if the amount of the contribution is favorable to your case, it is relevant to ask yourself if it represents the best solution when the interest rates on mortgage loans are very low.
So, with interest rates hovering around 1% when low-risk investments can bring 2% profits, injecting a lot of savings into the mortgage is not necessarily the best solution.
It is up to you to make your calculations according to your personal situation to find the best compromise. However, take into account the cost of mortgage credit, but also that of borrower insurance. In fact, the less the credit requested, the less expensive the insurance.
Simulate your personal contribution to make the right choice
If you have cash on hand or the ability to withdraw early, it’s a good idea to do some comparisons before deciding on 10, 20 or 50% personal contribution.
Do not hesitate to use an online loan simulator, which will give you in a few minutes the banks ready to finance your real estate project according to your contribution. Take into account the total cost of the credit expressed in euros or the APR (Annualized Global Effective Rate).
These two indicators include not only the cost of mortgage credit, but also that of borrower insurance. You can easily estimate the trade-off between personal contribution and remunerative investment as closely as possible.