Instead of protecting families, this year 2022’s usury rates prevent them from borrowing to buy their home. While waiting for the public authorities to react and initiate a usury reform, here are 3 irrepressible tips to avoid being penalized and finally see your dream of home ownership come true.
Why is usury blocking the real estate market?
Before discussing the winning solutions for building your financing practice, let’s remember why maximum legal rates beyond which banks cannot lend are bottlenecks in the real estate market.
Usury rates are calculated quarterly by the Banque de France on the basis of Middle April granted by credit institutions in the previous quarter, e increased by a third. For loans with a term of 20 or more, the usury rate is set at 2.57% in the third quarter of 2022.
With average nominal rates around 1.80% in 20 years at the end of July there is still one very low margin to incorporate all other costs relating to obtaining the loan in April : registration fees, guarantee (mortgage, bank guarantee) and insurance of the borrower. For the risk profiles paying a high price for their home loan insurance, the equation is even more complicated.
Access to mortgage credit has become a mirage for families, not just risky profiles. As soon as the bank offers a gross rate above 2%which seems to be a widespread practice in this summer period, the APR exceeds the usury bar and credit is denied. It is not the rise in interest rates that is blocking the market, but the stagnant level wear rate 2022whose calculation, out of phase with the current rates, has become indecent obsolete.
According to brokers, nearly one in two applications are currently being rejected, up from 20% in May, which was already a sign of a severe mortgage crisis. France has the lowest wear rates in the worldwe dare to say the stupidest in the world, when thousands of families cannot borrow when they are perfectly solvent and that theirs debt ratio it is well below the regulatory 35%.
In bad weather, the sail must be reduced, because the ECB rate hike in July 2022 it will further increase borrowing rates by tightening monetary policy. Waiting for Bercy, who for the moment denies wear problema reform of the legal rates is starting, here are our 3 solutions to lower the APR e stay below the wear threshold.
Solution 1: Delegate the insurance of the borrower
We can never repeat it enough, the external insurance proposed by the alternatives are between two and four times less compared to that offered by the banking group. Tailored, they match each person’s profile, which allows it adequate pricein the vast majority of cases, in large part more competitive.
The Lagarde law introduced the insurance delegation of the borrower in 2010 an opportunity to refuse bank insurance in favor of a cheaper offer with at least equivalent guarantees. Claim your rights and take out insurance adapted to your profile at the best price thanks to home mortgage insurance comparator. At an equivalent level of collateral, before the bank accepts a delegated contract, it is possible save thousands of dollars.
The numbers speak for themselves. A healthy 30-year-old who borrows 200,000 euros over 20 years at a nominal rate of 1.85% is offered by his bank insurance at the rate of 0.36%, or an insurance cost of € 14,400 on the total duration of the loan. By comparing the alternative offers, the insurance rate drops to 0.12%or a cost of € 4,800. Earnings: € 9,600!
With this example, bank insurance does not allow the APR to remain in usury (2.62%), assuming that the guarantee costs amount to 2,100 euros. With delegated insurance, the APR falls to 2.20%.
Some brokers suggest removing the borrower’s insurance from the APR, which would allow stay under wear the time that its level increases significantly, but the regulations do not authorize this practice for the moment.
Solution 2: boost your personal contribution
L’personal contribution became a banking necessity, while in 2019 it was still common to borrow without contribution. With the concession rules imposed by financial authorities (maximum debt ratio of 35% and duration of the loan limited to 25 years), together with the disturbed monetary environment, we observe a record level of personal contribution in the first half of 2022. It is currently around 20% of the transaction amount (excluding notary fees), and the larger it is, the less credit is used, as well as reassuring the lender on the proper management of their finances.
Mobilize a maximum personal contribution ! Easy to tell when you’ve already broken your piggy bank and savings accounts. Especially since banks require the borrower to keep a residual savings at least equal to 5 or 6 monthly payments. If you are an employee, unlock employee savings. The purchase of the main residence is one of the reasons that authorizes the early release of the sums paid into a PEE, a Perco or a PER.
Another tip for fattening up your personal intake: call family. Parents can do a monetary donation to each of his adult children up to € 31.865 without paying donation tax, every 15 years. They can also lend a sum of money to do so complete the budget, without interest or with minimal interest. If the amount exceeds 1,500 euros, it is necessary to formalize the family loan by debt recognition, loan agreement signed with private signature or notarial deed.
Solution 3: Borrow at an adjustable rate
The last option to counteract wear, which can be combined with the other two, is the variable rate credit. This seems counterintuitive at a time when fixed rates are still attractive. While they had disappeared thanks to fixed rates in the last three years, variable rate mortgages have begun to reappear in a context characterized by a very strong inflation and rising borrowing rates.
Offer of the banks limited variable rates “1”, that is, the initial rate cannot increase by more than 100 basis points. The maximum rate on the duration of the loan is thus known. This allows you to get a 1.20% credit over 20 years, which cannot exceed 2.20%. With a rate of 1.20% bounded by a 2.45% wearoffers to more comfortable margin for adding other credit costs of a fixed rate of 2% with usury at 2.57%.
Be well accompanied! More than ever theusefulness of an intermediary it is justified, the expert in assembling the financing practices and the negotiation with the banks to allow you to get your mortgage.