You think to borrow, bravo! But how much is it going to cost you? We all tend to focus on the interest rate .
If you have already obtained a loan, you may have noticed that the first thing your family or friends are going to ask you is the rate: “and what rate did you get? … my brother got better.
Of course, the interest rate has a major importance in the cost of real estate credit. But in times of low interest rates, it is common for more than a third of the total cost of a credit to be generated by other costs.
To get a good idea of the cost of credit, you must actually estimate the amount of 5 cost items we have detailed below. If your project is already well advanced, do not hesitate to simulate your mortgage with us.
1. The interest rate excluding insurance: the main cost of your mortgage
Real estate rate variables
The real estate rate offered by banks depends on the economic context: it reflects the level of central banks’ key interest rates. And you can not do much: it also varies depending on the characteristics of the loan and your record, including:
- The type of loan (repayable at fixed or variable rate, in fine)
- The term loan (the rate increases with length)
- The region
- The amount of the contribution
- The profile of the borrower (age, income …)
- This interest rate is called the nominal interest rate. It can be fixed or variable . In order to get the best mortgage rate, you can play on certain elements of your file, by highlighting your situation you can negotiate the rate.
Brokers for a better rate
You can also call on an intermediary whose job it is. These are mortgage brokers. Indeed, mortgage brokers like Pretto have preferential rates of the by banks. In addition, we highlight the positive elements of your file and thus gain bargaining power.
Think about the loans helped
The APR of the operation can also be reduced by using subsidized loans such as the zero-interest loan or social loan that are available to some households. Do not hesitate to contact one of our advisers to evaluate your eligibility.
2. The borrower insurance, large differences in cost
Why take a borrower insurance?
If the borrower insurance is not a legal obligation, it is systematically required by the bank and therefore conditions the granting of a mortgage. This is the second largest cost item of credit after interest.
Its role is to cover the repayment of the capital remaining due to the bank in the event of the death or disability of the borrower, but it can also ensure repayment of maturities during a period of unemployment.
Optimize the cost of borrower insurance
Its cost is very variable from one situation to another. Indeed, there are different types of contracts and from one insurer to another, the cost of the borrower insurance can vary from single to double.
The main parameters that will vary the price of the borrower insurance are
The coverage level: the minimum is the coverage of death and permanent disability, but it is possible to extend coverage to other situations, such as job loss.
Your age and your state of health
The type of contract (collective or individual): a collective contract (or group contract) will not take into account the risk associated with each borrower and will therefore apply an average premium to all borrowers, sometimes penalizing young borrowers against to an individual contract.
The competiveness of contract: all other things being equal, we can observe significant differences in prices from one contract to another, so we must take the time to compare well. To choose among many contracts, you need to opt for insurance delegation.
3. The mortgage or agency deposit does not cost the same price
Like insurance, the implementation of a guarantee is mandatory to obtain a mortgage. It ensures repayment of the loan to the bank in the event of default by the borrower, except in the cases covered by the insurance.
These are usually situations where the borrower does not pay back his credit when he has not had a serious health problem. Several types of guarantees exist: their costs vary greatly, and some do not apply to all situations.
There are two main families of guarantees:
- The actual guarantees ( mortgage , lien of money lenders, orpledge ) , formalized by a notarial act : in this case the bank is able to directly seize the property in case of default to repay.
- The personal guarantee (or bond): there are different surety companies (or sureties ), which replace the borrower with the bank in case of default.
- The famous credit logement is in the second category. To benefit from this guarantee, you must pay a contribution to a guarantee fund that depends on the amount of the loan. At the end of your credit, a portion of this contribution is paid back to you (including in case of early repayment ). But beware, after an intervention to reimburse the bank, the surety agency initiates a recovery process that can go as far as the seizure of the property.
4. Flexibilities: costs to negotiate
Many of you think of a home loan as a traced route whose monthly payments will invariably remain the same for the duration of the loan. Think again ! Births, divorces, removals, inheritances or periods of unemployment: the reasons for modifying the initial plan are numerous.
When the loan is put in place, the conditions on a certain number of flexibilities will be defined. They therefore deserve to be vigilant.
For example if you have a predictable profile and fear having difficulties to pay your monthly payments, know that several mechanisms can be provided in the mortgage loan. The modulation or the postponement of deadlines for example can respectively allow you to lower the amount of your monthly payments or to postpone the totality of the monthly payment at the end of your loan.
It is therefore possible to negotiate the price of these flexibilities before signing offers to reduce the cost of credit.
5. Set-up fees payable to add to credit costs
Depending on the formula you choose to find your loan , you will have to pay a fee from the bank. These fees are billed by the bank in exchange for the entire study of your loan application file.
They can represent up to 1% of the credit amount. They can be negotiated especially if you go through a broker who will do all the work of verifying your vouchers.
Going through a broker can save you the costs of the file but it can also add costs to your loan. Many brokers indeed charge a brokerage fee. They can vary between 500 and 2000 €.