On September 20, the European Central Bank once again increased its key rate by 0.25 points, bringing it to 4.50% compared to… 0.50% in June 2022. This surge is good news for savers, who benefit from higher risk-free investment returns. On the other hand, it complicates the situation for borrowers, particularly those planning to purchase rental property.
Because today, the rate on 20-year mortgages often reaches 4%. Only clients with a very good record (stable professional situation, low debt ratio, comfortable contribution, etc.) can obtain a better 3.50% on average. You still have to add the additional costs to calculate the overall effective annualized rate (APR). “This is on the one hand death, disability, incapacity for work insurance (DIT), which repays the credit in place of the borrower if he is the victim of a serious disaster, on the other hand of the guarantee (mortgage or deposit) if he defaults, and finally the application fees”, lists Cécile Roquelaure, director of communications for the broker Empruntis. Taken together, these extras seriously increase the bill and further reduce the debt capacity of borrowers. Because the higher the APR, the higher the monthly loan payments. However, according to a rule from the High Financial Stability Council (HCSF), the latter cannot exceed 35% of income, with rare exceptions.
0024_NEW3769CT Average mortgage rates as of September 15, 2023
© / The Express
If you plan to invest in the coming months, look into your financing as soon as possible. Do you already have a loan being repaid? You will probably benefit from going through your current bank to sign up for a new one. Provided you have not had any payment incidents and are rarely overdrawn, it will be easier to negotiate with your advisor. “It is especially for their oldest clients that financial institutions deviate from the 35% rule,” confides Ludovic Huzieux, president of Artémis brokerage. Another piece of advice: do not systematically negotiate loan insurance when you take out it. By accepting your bank’s contract, even if it is more expensive than those of the competition, you will soften it up. Once the capital has been released, you will have complete freedom to renegotiate your contract or… replace it at any time with cheaper insurance found elsewhere.
Avoid compulsive spending!
To succeed in your operation, you will have to prove the seriousness of your file in any case.. For the past year, banks have been seeking to reduce the risk on all their loans. To do this, start by cleaning up your “customer profile”. As your latest statements will be reviewed, transform yourself into a model saver. Avoid big purchases and compulsive spending with your bank card. Also make regular payments on investments, to prove to the establishment that you know how to save. Then, gather as much contribution as possible, because by having 25 or 30% of the price of the targeted apartment, the amount of your loan will be lower and your debt rate will drop. Two major assets today to encourage a banker to trust you.
“Investors also have an interest in putting together a file on the targeted property accompanied by rental certificates provided by a local real estate agency,” advises Ludovic Huzieux. With this data, the bank will be able to estimate the rental value of the accommodation, and therefore the amounts that you will receive. “It will integrate between 70 and 80% into the borrower’s income to calculate their debt ratio,” specifies Cécile Roquelaure. Same case if you plan to buy a “thermal strainer” or a property with work. “We must provide quotes which quantify the amount of the planned renovations,” insists Cécile Roquelaure. Once again, these steps will work in your favor, because they will secure your file. However, a serene banker is a banker who lends…