That’s it, there you are. You have found the property of your dreams . The signing of the compromise has just taken place, it’s a great step that you have just taken. But you still have one last test to pass, and not the least: go around the banks and brokers to find your mortgage! We often have the idea that negotiating a mortgage corresponds “ simply” to obtaining the lowest rate. If it is partly true, other elements are to be taken into account, which it could be harmful to forget.
The contractual rate of your mortgage is the central element of your loan. It is he who will largely define the monthly payments that you will have to pay during the years that your loan will last, and consequently the overall cost of your acquisition . But beware, this is not the only element to take into account in this calculation!
For more details on how your monthly payments are calculated based on your rate, I invite you to take a look at the article Why does the bank pay itself first?. Of course, try to negotiate it as low as possible and do not hesitate to compete .
We often tend not to take them into account, but they are an integral part of your mortgage offer. Even if this amount is often modest compared to the overall cost of the mortgage, it can still represent several hundred euros. Are potentially the equivalent of several days of work depending on your salary, so think about it at the time of your choice.
Note that the application fees are negotiated when your credit is set up. But new application fees may be required of you as part of the renegotiation of a mortgage already in place, keep in mind that you can also reduce or eliminate them by negotiating these.
When you take out your loan, the bank, like you, takes a risk. If it is able to assess your solvency and your borrowing capacity in the short term , the exercise is much more difficult to carry out in the long term. It therefore requires a guarantee, which to summarize can take 2 distinct forms:
These 2 methods each have their advantages and disadvantages, the idea is not to describe them here. But they also have a cost, remember to take this into account in your calculations.
This is an interesting subject, which can save you thousands of dollars without too much difficulty. When you take out a mortgage, it must often (always?) be accompanied by insurance. Very often, the bank will offer you its own, or even try to impose it on you. This is generally group insurance: understand that all policyholders pay the same amount and have the same rights and guarantees.
Besides that, it has been possible for you for several years to go through a delegation of insurance, ie to go through an organization other than the one offering you your credit. The advantage of the latter is, often, that the insurance is individual and dependent on your profile . Thus, a young non-smoking athlete will more easily obtain a lower insurance cost than a sixty-something smoker. This delegation of insurance can allow you to save several thousand euros, so don’t deprive yourself of it! This is undoubtedly the best axis of economy after the rate of your loan itself.
Note in passing that it is possible since July 26, 2014 to change insurance the first year following the subscription of a mortgage, through one of the aspects of the very recent Hamon law.
What are IRAs? The acronym stands for Indemnité de Remboursement Anticipée , but still? In concrete terms, these are financial penalties that you are likely to have to pay to the borrowing organization in the event that you decide to repay all or part of your mortgage before its expiry. Legally, these indemnities cannot exceed 3% of the outstanding capital, within the limit of 6 months of interest .
Concretely and by simplifying, this means that if you have borrowed €200,000 from your bank and you have €150,000 left to repay, which you want (and can!) to settle all at once, the bank will ask you for up to €4,500 under IRAs , corresponding to 3% of the remaining €150,000.
In terms of negotiation, the ideal is of course to have zero IRAs, in which case you would have nothing to pay in the event of total or partial prepayment. This is an important point to take into account if you know in advance that you will probably not go to the end of your credit (resale of your property, expected cash inflow, etc.). These IRAs can also be conditioned : for my rental investment, they are for example capped at 10% of the legal rule (10% of the 3% or 6 months of interest therefore), except in the event of repurchase by the competition of the credit real estate.
Another point that it may be appropriate to negotiate, the possible modulation of your monthly mortgage payment . Depending on your project and the different events of a life, it could be interesting to adjust your monthly loan payments. This can be done both upwards and downwards. However, a change of this type may incur additional costs , from a few tens to a few hundred euros. You can also be limited, for example, to one modulation per year. Or even be limited to 5 modulations over the entire duration of the loan. Or even a free modulation per year within the limit of a shortening or lengthening of the overall duration of your loan by a maximum of 2 years.
Again, lots of possibilities. Think about it also according to your life plans. For example, you have just acquired a small apartment that you have rented out. Besides that, you end up repaying the credit of your main residence in 5 years. At this deadline, it could be interesting to increase the monthly payments of your credit on the rental to reduce the cost.
So much for the common elements to take into account when taking out your mortgage. Besides that, it is likely that the bank will also ask you for a number of things to grant you the loan under optimal conditions for all. Let us mention in particular:
All these elements are to be taken into account and are negotiable. However, do not be an extremist on all these themes, the idea is obviously to find a compromise that best satisfies both parties. Keep in mind that some of the elements mentioned are not definitive. I am thinking in particular of home insurance, which you can change after the first year.
These are already some of the elements to remember when you take out your loan. In general, compare the overall cost of the mortgage. If you want to compare rates, take the Global Effective Rate, or TEG. The latter must include all the costs associated with your loan, in particular:
Are you aware of all these elements? Do you have them in mind when working on your real estate project with your bank? Have any themes been overlooked?