Real estate credit: our tips to convince your banker in spite of everything

At this rate, by the end of 2022, only those in their thirties who have just pocketed a beautiful inheritance will be able to take out a loan … real estate transactions. Furthermore, it makes the rules intended to regulate the market particularly penalizing. Like the one dictated by the High Council for Financial Stability (HCSF), which prohibits the monthly loan payment, including insurance, from exceeding 35% of borrowers’ income. With the same duration of the loan, the rebound in rates therefore automatically excludes new profiles every month, in particular new buyers, with limited income, and investors, who are often already in debt.

Same difficulty with the usury threshold, this ceiling calculated by the Banque de France, beyond which it is forbidden to get into debt. As interest rates rise, an increasing number of borrowers are approaching, especially older ones. To make matters worse, the banks themselves are becoming more selective and take into account the effect of inflation on household finances in their analysis. Result: according to a recent survey, the loan refusal rate would reach 20%, in 85% of the credit intermediaries surveyed. Don’t panic though: here you will find all the techniques to meet these standards, or convince your banker. It would be a real shame to give up, because all the credits currently granted are at a rate below inflation. Never seen.

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Rates on the rise: some banks even turn off the tap

Since the beginning of 2022, banks have raised interest rates by around 0.6 points and sometimes even by 1 point. Yet these establishments continue to open the doors of credit. “The cost of bank refinancing has increased much more markedly, reaching around 2.5-3%, recalls Olivier Lendrevie, president of the Cafpi broker. As a result, some of them have decided to reduce their production. Or, like HSBC, reserving it only for its customers. Or, like LCL or Société Générale, exhibiting particularly salty scales, a discreet way to withdraw from the market. Almost one in two banks had withdrawn this way this summer …

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To borrow anyway, it will be better to knock on the right door. Some banks therefore have a privileged clientele: artisans or business executives on the side of the Banques Populaires, for example, and executives from BNP Paribas. While first-time buyers will be treated well at the Caisses d’Epargne, as well as at La Banque Postale. The problem is that this trading strategy changes often every month… the easiest way, therefore, will be to contact a broker, who will do the market tour for you. This was successful for this couple from the Paris region, who scored 55,000 euros net of annual income, who tried to borrow 176,000 euros in 15 years. A visit to one of these wholesalers allowed them to lower the rate from 1.42 to 1.10%, or a saving of € 4,512 in interest.

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Debt ceiling: penalizing for first-time buyers

As rates rise, HCSF’s recommendations, which mandate not to exceed 35% of debt including insurance, increasingly exclude borrowers. “Between January 2021 and last June, the share of rows in nails dropped from 71 to 52%, indicates Maël Bernier, spokesperson for Meilleurtaux. And nearly 10% of the other files were no longer very far from this limit. To return below this 35% threshold, the simplest way is to extend the duration of the credit, in order to reduce the amount of the monthly payment … But, if this is too expensive, or simply not possible ( the HCSF prohibits in over 25 years), it will then be necessary to play the game of the banks, promising for example the subscription of a home insurance, or a life insurance contract.

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“They remain attentive to these counterparts, which will allow them to make the relationship fruitful,” says Cécile Roquelaure, director of studies at Empruntis. Enough to convince the director to use the flexibility at his disposal, provided by the HSCF. This is how the factories can derogate from the concession criteria, up to 20% of their production, and essentially in favor of new buyers.

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Less easy, on the other hand, for rental investors: the quota of production outside the criteria reaches, in their case, only 4%. “They can turn to banks that, in their debt-to-GDP ratio calculations, take into account future rents of up to 90 or 100%, as opposed to usually 70%,” advises Sandrine Allonier, spokesperson for the Vousfinancer broker.

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Wear rate: almost 20% of the files are invalid, but they are solvent

In principle, this is an instrument for the protection of borrowers: banks cannot lend beyond the usury threshold, a rate including all costs related to credit, such as insurance or administrative costs (we then speak of the annual rate global actual, the APR). Here alone, this reference is only updated every quarter, and from the average of the practices funded in the previous three months, and simply increased by a third. The mechanism, which is virtuous in a period of falling rates, on the other hand becomes infernal in the event of a rapid rebound in these same rates.

The wear threshold therefore rises only with a shift, and too slowly. Therefore, for the third quarter of 2022, this rate was only set at 2.60% for loans between 10 and under 20 years and at 2.57%, a curiously lower level, for those 20 years and beyond. “Or less than 1 point of nominal rates in 20 years, granted last July, which reached 1.65%,” says Julie Bachet, general manager of Vousfinancer. What multiplies the disappointments. “The share of cases, among those perfectly solvent, rejected due to exceeding the usury rate reached 20%, only in May and June”, testifies Olivier Lendrevie.

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As our table shows, this refusal particularly affects older borrowers, with high insurance costs. But not only. Example with this bachelor of 30 years, with 15% down payment, and who is preparing to borrow 205,000 euros in 25 years, at the nominal rate of 1.90%. By combining the cost of insurance (0.36%), the costs of the guarantee (2,054 euros) and the ancillary costs (3,000 euros), your APR will reach … 2.77%, or 0.20 points above the wear rate.

Capital

To return below this threshold, if administration or brokerage costs have already been reduced, the easiest way will be to apply for an insurance proxy, which is generally less expensive. In case of refusal, it will be necessary to agree to be less covered, for example by lowering the insurance quotas, from 100 to 50% per borrower. “We are also trying to negotiate, for each head, a group insurance at 50% and a delegation at 50%. This sometimes allows us to get into the nails “, explains Sylvain Lefèvre, president of La Centrale de financement.

Reluctance of banks: the personal contribution requirement doubled

As energy and other commodity prices rise, banks are doubling down on caution. Therefore, to calculate the rest of their borrowers’ lives, they now take into account the distance they will have to travel, by car, between home and work. Or who require, to better evaluate their heating costs, the energy class of the accommodation. Same caution when it comes to financing the purchase of a house to renovate. Not only will they want to know the conditions of the boiler and the roof, but they will certainly provide a margin for the budget of the works, just to cover the possible increase in the budget.

Last precaution: they now require an additional personal contribution, over the 10% generally required to cover notary fees. The required share can thus reach 20%. “This requires the injection of a portion of personal savings, which varies from bank to bank, but reaches about four or six monthly loan installments,” says Julie Bachet. To reduce the needs of your consultant, you will need to reassure him, presenting an irreproachable practice, without overdraft or unreasonable purchases. Also remember to specify your budget, for example by indicating that you will take public transport, or that you will do a large part of teleworking.

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Education times: they tend to get longer

Another repercussion of the rapid rate hike: in the first half of the year many buying candidates decided to accelerate their projects, thus contributing to the congestion of lending services, particularly at the few banks that still play, and present convenient stairs. It is therefore necessary to count three full weeks, when it is not a month, so that they only have time to analyze your practice. Certainly, with the end of the summer holidays, and the return of the staff, these deadlines should be shortened. However, it would be better to take the initiative. “A total period of 3 to 4 months must be planned between the first contact with the bank and the payment of the funds, warns Maël Bernier. This will save you unnecessary stress. “

It is also advisable, where possible, to extend the term of the suspensive condition for obtaining the credit on the compromise to 60 days, or even 90 days, normally set at 45 days. And be sure to send a complete file right from the start. Most banks implement their loan proposals on the date of the complete dossier and not on the date of receipt. In the event of a round trip to add the missing parts, you risk a rate hike.

For its safety, the transition to competition has become easy

It took four laws, and more than ten years, for the insurance market for borrowers, still blocked at 85% by banks, to be fully liberalized. From 1 September it will be possible to withdraw from the contract at any time, without waiting for the anniversary date of signing the loan. And therefore opt for proxy insurance which, unlike banking group contracts, follows an age-appropriate rate, generally cheaper, and this, whether your credit is just underwritten or already old. Furthermore, from now on, any medical questionnaire will be prohibited provided that the insured share does not exceed € 200,000 per capita and that the loan is repaid before the age of 60.

Finally, to facilitate the choice of borrowers, the standardized information sheet, which must be presented, will indicate the cost of coverage on the first eight years of the loan, the average duration of ownership of a property. Enough to avoid the trap of degressive insurance, frequent in banks, expressed as a percentage of the residual capital due. If they are often less onerous, over the entire duration of the loan, than those expressed as a percentage of the borrowed capital, they are generally more onerous in the event of early repayment!

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