How to finance the purchase of your home?
You want to buy a property but you do not know how to finance it? Very few people can directly afford their future home, especially when it is a first purchase. Given the amount of the good, it is normal to go through intermediaries. Here are the different solutions available to you to cover your expenses:
The classic bank loan:
This is the most common solution: a bank advances the amount of money you need against interest. You then repay it regularly at a rate set in advance, usually every month. Your monthly payments then include the interest due to the bank as well as a portion of the amount borrowed until the entire amount is repaid.
The longer your repayments are spread over time, the more interest you will have to pay, however a short-term credit will result in heavier monthly payments. It’s all about balancing what you can pay each month and what you are willing to pay over the life of your credit.
Fixed or variable monthly payment?
Regarding interest, the bank will let you choose between a fixed or variable interest rate:
– The fixed rate:
The fixed rate is based on the current interest rates at the time of signing your credit. Once chosen, it can not move, neither upward nor downward. This solution guarantees you identical monthly payments throughout your loan, regardless of the evolution of rates.
– The variable rate
The floating rate follows the evolution of rates, whether up or down. Your interest and therefore your monthly payments vary depending on the context. However, to avoid large discrepancies, banks generally offer adjustable rates capped. Thus, if at the time of signing your loan the rates are at 3% and the bank offers you a 2% cap, your interest will always be limited between 1 and 5%.
Note that to maintain a certain regularity, the rate of your credit will not be revised with each movement of rates. The banks usually set in the loan agreement a frequency at which the rate and therefore your monthly payments are reviewed.
Variable rates are interesting because they are lower than the fixed ones. However, to make a significant contribution, make sure that your floating rate is at least 0.80% lower than fixed rates. Thus, if interest rates rise again, yours will reach approximately the same levels as the fixed rates in effect at the time of subscription.
Where to subscribe a mortgage?
Most banks offer home loans. The signing of a contract entailing a transfer of your file and an account opening in the new establishment, loans are for them, a great way to attract customers. Even if your bank offers excellent credit conditions, it is likely that another bank is ready to make a better offer.
To study all offers in the market without having to solicit all banks, consider using a mortgage broker such as Empruntis.com. The latter compares the various proposals of financial institutions for free, finds for you the best real estate rate and advises you on the most appropriate approach to your project.
Do not hesitate to inform yourself, make simulations and especially compare the different offers!
Another way to finance its acquisition: state aid. Unlike conventional credit, they will not always allow you to finance your entire investment, but they can help you a great deal, if you meet the requirements:
- The PTZ +
The Zero Plus Loan was created to help individuals in their first real estate purchase and promote the acquisition of energy housing. As the name suggests, it does not charge interest. An advantageous credit is of course subject to:
– Not having owned during the two years preceding the loan application
– Not to exceed a certain ceiling of resources
– To acquire a dwelling intended to serve as principal residence
– Buy a new or old property but considered fiscally as new
– Not to exceed a certain amount (€ 285,000 maximum in Ile-de-France).
You can find more information about PTZ + on nexity.com.
- The loan agreement
This credit may be granted by banks that have entered into an agreement with the State. Its main interest is that it entitles you to APL, which significantly reduces your monthly payments. It does not require any resource limit and may cover your entire purchase as long as it is a primary residence. Its interest rates are also limited to a maximum of 5.20% over 20 years.
- The Social Accession Loan (PAS)
The social loan is a form of loan agreement reserved for the most modest households (51 000 maximum income for households of 4 people). It finances the purchase of his principal residence at interest rates that can not exceed 4.60% over 20 years.
- The housing savings plan (PEL):
The housing savings plan is a bank savings block for four years. At the end of this period, the subscriber is entitled to a loan at a preferential rate over a maximum of 15 years to acquire his principal residence. If he has opened his ELP after 1 March 2011, he will also be entitled to a state bonus of up to € 1,000 or € 1,525 for energy housing.
- But also…
Depending on your job or your location, you may also have special assistance such as the Housing Action Loan, the loan to civil servants or the loan to local authorities. Find out from your employer and your community!
Whatever your method of financing, make the calculation of your mortgage to prepare the best your project.
Good to know: we often think about the price of the property, sometimes notary fees… but we often forget all the expenses involved in a real estate purchase:
- The banking fees
- Home insurance
- The borrower insurance
- Agency fees
- The mortgage of the bank
- The housing tax
- The property tax
- Condo fees