How to lower the cost of your payday home loan
The mortgage can finance the entire purchase price of a property if the future buyer does not have the necessary amount in the immediate future. The repayment of this one is done by the payment of monthly installments spread over a duration which can exceed 25 years.
It is enough for a future buyer to pay € 969 per month to obtain a capital of € 150,000 repayable over 15 years. But housing loan comes with a cost, it is the interest that constitutes the remuneration for the bank.
For the present case, with a rate of 1.40% (including 0.36% insurance), the cost is € 24,480. It can be more expensive depending on the rate, the amount of capital and the duration of the loan.
However, it is possible to save several thousand or even tens of thousands of euros on the cost of the loan. Here are the effective ways to lower the cost of one’s home loan.
1. Provide a personal contribution
The personal contribution is a financial participation of the purchaser in the purchase of his property. This one should not be a loan. It is the sum obtained following savings, the sale of a property or a family help.
The personal contribution gives the bank confidence and encourages it to offer the best rate . Most importantly, the cost of credit decreases as the amount borrowed decreases. With the contribution that can be worth 20% of the purchase price of the house, the buyer can reduce by 20% the possible expense when the repayment of the property loan.
2. Take out a 2017 PTZ and other real estate acquisition aid
The zero rate loan is a sure way to pay less in real estate loan cost in 2017. It is a free loan (zero euro interest) that can finance up to 40% of the purchase price. As a result, with the PTZ, the borrower can reduce the cost of his credit by up to 40%. There are other cheaper loans compatible with the home loan and the PTZ as is the case of the Social Accession Loan.
3. Borrow for a shorter time
At equal capital, the cost of the loan increases with the duration of the loan. For the mortgage credit rate in January 2017, take the example of a loan of € 150,000:
- For 10 years, the rate is 1.10% and the cost would then be € 13,870.
- For 15 years, the rate is 1.40% and the cost would be 24 480 €. That is € 10,610 more than the 10-year loan.
- For 20 years, the rate is 1.60% and the cost would be € 36,177. That is € 22,307 more than for the 10-year loan and € 11,697 more than the 15-year loan.
It should also be noted that insurance, the level of which is estimated at 0.36% (€ 45 / month), generates additional costs as the duration increases.
4. Application fees
The application fees vary between 0.4 to 1% of the borrowed capital. For a credit of 150 000 €, the borrower can negotiate between 600 to 1 500 €. There are credit institutions that offer a flat fee of 500 €. However, a good credit broker can obtain the cancellation of fees. Either a saving of a few hundred to a few thousand euros depending on the sum of the loan requested.
5. Hire a mortgage broker
To obtain credit, the broker speeds up the processing of the file. He optimizes the chance to obtain it and takes care of all the steps instead of the borrower while advising and helping him.
The intervention of the credit broker reduces the cost of credit on all levels. He may find a loan cheaper than the rate in the market given his bargaining power and his relationship with the banks. It can intervene for the cancellation or the reduction of the expenses of file. The broker advises for the winning financial package, for loan terms tailored to the profile of the borrower.
6. Subscribe to a housing savings plan
The ELP is a savings that allows the real estate developer to make a personal contribution. Not only does he not pay interest on this amount but it is he who earns a 1% interest since August 1, 2016. He is entitled thereafter to a housing loan of € 92,000 plus a possible premium of State of € 1,525.
7. Have a stable work situation
Everyone is not so fortunate but having a good career in permanent and well paid or performing a paying function as being a lawyer or a notable business leader is entitled to credit at the best rate. A public service profile is very much appreciated also for the guarantee of employment.
8. Borrow young
The younger and healthier the borrower, the better chance they will have of obtaining a credit. At the insurance level, he can save a lot while a senior will be severely disabled and will have to pay higher insurance contributions. This is evident in the total cost of the loan.