From the date of the signing of the agreement or the promise to sell, you have 45 days to negotiate the most advantageous mortgage.
It is not because the interest rates of the credits are at their lowest level that it is not necessary to negotiate as much as possible in order to reduce the overall cost of your mortgage.
- 1. Enhance your “borrower profile”
- 2. Play the competition
- 3. Delegate your borrower insurance
- 4. Remove prepayment benefits
- 5. Choose the most interesting guarantee
- 6. Negotiate the expenses of files
Enhance your “borrower profile”
When applying for real estate credit with a bank, not everyone enjoys the same conditions. Your goal will be to let your banker know that you are not just interested in real estate loans, but rather looking for a long-term business relationship with your bank, in order to benefit from the most attractive interest rate possible. . Arguments:
You present a customer profile that can seduce the bank: for banks, the rate of a mortgage is a product of appeal to attract new customers likely to domiciliate their income, to entrust their savings, or subscribe to other financial products. Your professional situation will be paramount: the bank will consider your status (eg executive), your seniority, your age and your ability to evolve.
Your debt ratio is low: the ratio between your monthly income and your financial expenses determines your savings capacity. Between 10% to 15% of indebtedness, it is excellent. From 33%, banks will not take the risk of lending you money, unless your income or wealth is very important.
You have a big “rest to live”: it is the sum which remains to you after the payment of your monthly installment of credit. The minimum threshold required by the banks is 400 euros per household + 150 euros per dependent.
You provide a significant contribution: a contribution of around 10% of the purchase price of the property will be required. A contribution between 20% and 30% will allow you to benefit from a much better rate.
You manage your accounts well: no overdraft, no incident of payment for your other possible loans, no consumer credit. Your last three statements of account will be required: if they are not exemplary, it is better to postpone your loan application than to present a bad file.
Play the competition
It is essential to consult several banks , this will allow you to negotiate the best by arguing the offers of competition. After meeting with various bankers, and with a written proposal from one of the financial institutions, nothing prevents you to repeat a tour of the banks for a final call competition: you can certainly get some additional benefits.
You can also contact the brokers real estate credit. They will negotiate for you with financial institutions and will often obtain interesting terms, not only in terms of interest rates, but also in terms of other fees. Even if the service is theoretically free because the banks return a commission to the broker when a loan is taken through them, you will sometimes have to pay a fee, check well before.
Delegate your borrower insurance
Do not accept the offer of insurance borrower of your bank without having made quotes for a better insurance of loan , because the economy is real and is in thousands of euros. In fact, insurance alone can represent up to 30% of the total cost of the loan! It should be noted that the group insurance rate offered by banking institutions is around 0.40% while a delegation of insurance may lower the rate to 0.14% for the youngest borrowers. Know that the bank does not have the right to refuse you an external insurance.
Finally, the fact of paying your insurance borrower cheaper does not mean that you will be less well insured, on the contrary, because not only the guarantees will generally perform better than those that the bank will offer, but in addition some insurance companies to better insure risks such as the practice of certain sports.
Remove prepayment benefits
If you want to one day prepay your mortgage , your bank will ask you for an Early Redemption Allowance (= IRA), a fee of 3% of the outstanding capital, capped at 6 months interest.
These IRAs are very important to negotiate before signing your mortgage offer: imagine that you borrowed € 100,000 today over 25 years at 4.50%. If you resell (for example) your property in 5 years and you have not negotiated this close of the loan agreement, you will have to pay your bank 3% of the outstanding capital, ie € 2,635!
These benefits may be negotiated to be exempt, provided you think to ask your bank at the time you apply for a loan.
Choose the most interesting guarantee
In general, you will have the choice for your mortgage loan guarantee between a mortgage or a deposit.
The registration of a mortgage by the notary is expensive: land registration tax, salary of the conservator of mortgages, fees, VAT …. In the end, the amount of the fees will be between 3% and 4% of the amount of credit in the new and 7% in the old.
The deposit is a more interesting solution. You can ask a third party to vouch for it, or call a bonding company. In case of default of repayment, it is this company of guarantee (the Credit Housing for example) which will refund the bank and will deal with the sale of your property.
The fees, which vary between 2% and 3% of the credit amount, will be paid in the form:
- commissions paid to the surety company,
- contributions to a mutual guarantee fund.
The price of this guarantee varies enormously depending on the banks. For a good comparison, ask for the exact cost of the deposit (because a portion of the contribution will be returned at the end of the loan repayment).
Negotiate the expenses of files
Banks, like most brokers, can work without charging you the fees. This is due to the current strong competition from financial institutions, and also because in comparison to other products and services, billing fees does not yield a lot of money.
If you had to pay, however, be careful: for example, for a loan of € 100,000 to 4% over 20 years, € 1,000 processing fee represents an increase of 0.08%. If another bank offers you a 4.05% credit without a filing fee, then it is more interesting to take the highest rate loan.
CONCLUSION : It will be very difficult to negotiate all these costs and you will certainly be forced to compromise. We remind you that the two points that will make you realize the most savings are the rate of your credit and the choice of your insurance borrower .