You plan to buy or renovate your home but you do not have a budget enough. So you decided to take a mortgage to complete your project. Especially since the mortgage rate is very interesting on the market. However, the bank will not grant you this loan without taking some precautions. So, before you start, here we reveal the essentials on the mortgage rate and all that surrounds it.
Real estate credit: Cost and rate
To begin with, home equity, also known as home equity, is defined as a loan that is used to finance the purchase of real estate, the construction of a house or the development or renovation of a residence or building. apartment.
There are many things to consider when determining the cost of this mortgage. Among them, fees, ancillary costs and insurance contracts whose rates can be very competitive.
But the main element is the mortgage rate which can be fixed or variable.
The fixed rate is initially negotiated and remains the same throughout the term of the loan. Which means that you know exactly what you owe to the bank during the repayment period. But the problem is that if you want to repay your loan before its due date, a penalty of 2 to 3% of the remaining amount is imposed in most cases.
In the case of variable rate mortgages, this is a loan whose interest rate can go down as well as up. In other words, it varies according to the loan rates applied in the current market. And its other advantage is that you can repay your loan early without penalty fees.
How is the Real Estate Credit Rate calculated?
The mortgage rate or APR is an annual rate, expressed as a percentage. This Global Annual Effective Rate is calculated in arrears and according to the method of equivalence.
Many points go into the calculation of this interest rate. Among others:
- Fees: For any subscription to a mortgage, the bank asks you to pay a handling fee. They vary from one bank to another but also according to the profile of the borrower.
- Cost of insurance or insurance costs : Subscribing to death and disability insurance is a condition that all banks impose on people who want to benefit from a mortgage. The bank has the assurance that the monthly payments will be paid, reimbursed, even in case of loss of employment, death or if a disability occurs.
- Guarantee fees: To guarantee a mortgage, various options exist: PPD, mortgage, mutual guarantee or personal.
Other fees may be added according to the bank’s policy.
Why are there different rates?
For a home loan, a bank can offer a mortgage rate much more attractive than another on a loan of the same amount.
This disparity is explained by the commercial policies put forward by these financial institutions because of the competition from other banks and the objectives they have imposed on themselves.
If you are on your first mortgage, you should know that there are certain conditions that must be fulfilled for the bank to consider granting you this loan.
The main conditions for obtaining a mortgage are:
The financial situation of the borrower
This is the element that will most influence the decision of the bank and lead him to grant you or not the loan. The more comfortable your financial situation is, the more likely you are to succeed.
The bank will review, check your payslips and all your sources of income to determine the exact amount.
The debt ratio
The second main condition is the debt ratio. It is calculated taking into account monthly charges and income.
This is the point that will define the amount you can pay each month to repay your credit without risking a debt situation. This rate should not go beyond 33% of revenues, normally.
The duration of credit
In general, underwriting a mortgage lasts about 20 years and can go up to 25 years for young households.
Note that this duration depends mainly on the resources available to us and especially the financing needs.
Get the best rate with our Credit Simulation
To help you choose the best mortgage rate, we invite you to test our mortgage simulator.
For the simple reason that it’s a great tool that will tell you everything there is to know about your project such as the fees to be paid, the capital or value of the loan, the repayment term, etc.
It will even give you the ability to directly calculate your debt ratio based on your income. Thus, you know what to expect before starting the steps with your bank.
Its main assets:
- An overview of several partners with quote at the key
- The opportunity to anticipate and reflect carefully on his next loan
- Fast and easy to use.