We always talk about the personal contribution as a sine qua non for obtaining a mortgage. However, this is only a recommendation from the banks to facilitate access to borrowing. The contribution is therefore not compulsory.
Indeed, some borrower profiles manage to get a mortgage without contribution, or loan at 110%. What does a mortgage without contribution consist of? In what situation can you buy an apartment or a house without a nest egg?
110% home loan: why are banks cautious?
The personal contribution requested by the banks is 10% of the amount of the mortgage. This is why we talk about a 110% mortgage in the absence of contribution. This amount is important because it does not relate to the property itself …
What is the personal contribution for?
The personal contribution makes it possible to finance the ancillary costs linked to the purchase of the property. These are therefore notary fees and guarantee fees, bank file fees or even real estate agency fees and brokerage fees if they exist.
Beyond its “usefulness”, the personal contribution also demonstrates the investment of the borrower and his seriousness, since he gives himself the means to carry out his real estate project. It is also indicative of its savings capacity and reassures the bank.
Does the personal contribution constitute a guarantee for the lender?
Yes, not only does the personal contribution give credibility to the borrower, but in addition it protects the bank in the event of default in the payment of due dates. And for good reason, the 10% contribution is used to cover “intangible costs”.
Consequently, if the bank has to recover the real estate, it will only have the “material”, which may prove to be insufficient to fully cover its costs.
Banks therefore only grant the 110% mortgage loan to certain defined borrower profiles …
What are the borrower profiles eligible for mortgage loan without contribution?
What matters to apply for a 110% mortgage loan is above all the sincere and transparent nature of the process. Thus, the borrower should not hide the lack of contribution by concealing this point, but on the contrary explain it. If this is legitimate, the bank is likely to give a favorable response.
A young worker who is starting his professional life has every legitimacy in not having a personal contribution. Becoming a young owner is also a sign of personal stability and is appreciated by banks.
Tenured civil servants by definition have job security. The income is guaranteed for years to come, which is particularly well received by banks which can finance your real estate project, even without a contribution.
People who have suffered the vagaries of life
Sadly, there are also people who can lose the cash they had available through significant personal change. This may be the case in the event of the death of the spouse, in the event of divorce or even a long illness.
The bank must even have been following you closely during this time and therefore knows what you have been through. This loss of economy has a rational and tangible explanation, so it is possible to negotiate in your favor as soon as the situation improves.
Some savers have large sums of money set aside and prefer to avoid personal investment. This is explained in particular when the return on their investments is much higher than the interest rate on their credit.
In other words and to schematize, a borrower obtaining 10,000 euros of annual return on his investments has every interest in opting for a mortgage whose interest amounts to 5,000 euros per year.
Real estate investors
Making a real estate investment, in particular rental, supposes that the deduction of charges is essential. From a fiscal point of view, deducting loan interest from the leased property allows a mechanical fall in property income, or even the creation of a property deficit.
This is why rental investments are frequently requested without personal contribution. On the other hand, it will be necessary to keep a debt ratio below 33% for the credit file to be accepted.
Put the odds on your side to obtain a 110% mortgage
Let’s face it, getting a mortgage without down payment is not an easy task, we will have to show our feet and convince the bank. It will also undoubtedly be necessary to revise its claims downwards, because the negotiations are proving more difficult. However, a few tips will help you put the odds on your side to become an owner in the best possible conditions.
The conditions to be respected for a mortgage without contribution
If you do not have a contribution or do not want to “break” your savings, it is necessary to present an impeccable file to the bank. Consequently, here are the criteria that you will have to respect …
The debt ratio
The lower your debt ratio after the credit transaction, the less risk the bank takes. She will be more inclined to grant your mortgage if your debt ratio does not exceed 33%. If it is lower still, it is even better.
The rest to live
Apart from the debt ratio, the rest to live is important for the bank, since it allows you to estimate your monthly availability and your ability to face the vagaries of life. The higher it is, the more kindly your file will be approached.
If you don’t have a contribution, the bank will be even more vigilant in managing your budget. Your bank accounts must be irreproachable: no rejection of direct debit, no intervention commission, no overdraft authorization used.
In addition, regular payments, even a small amount, from your checking account to a savings account will be a welcome effort.
The professional situation
Professional stability will be an absolutely essential element to obtain a mortgage without contribution. You have an advantage to be a civil servant, in CDI or liberal profession with a lasting income for several years.
A bank guarantee, but also a real estate security through a mortgage or a privilege of money lenders will be systematically requested. Large savers may also consider pledging their investments to secure the bank against any default.
Loans helped to obtain a 110% mortgage
Assisted or subsidized loans replace, to a certain extent, personal contributions. In their presence, it is easier to get a 110% mortgage, especially if the borrower is a first-time buyer.
Thus, the following loans are particularly appreciated by banks:
- PTZ Zero Rate Loan
- The 1% housing loan
It is of course necessary to check your eligibility for the PTZ according to your real estate project, and / or to get closer to your employer.
Building your borrower file properly
As we have seen, it is your convincing presentation and your qualities as a good manager that will make the difference. To properly estimate your real estate project without contribution, do not hesitate to use an online credit simulator.
To be represented and to be well supported, benefiting from the services of a broker is a real plus to obtain your mortgage at 110%.