1st real estate purchase: Tap into the right sources of financing

Becoming a homeowner for the first time raises many questions. Especially on the financial level. What budget can you devote to this project without "depriving" yourself? To take stock of your finances, it is essential to establish a financing plan and to follow some basic rules.

Limits not to be exceeded

There is no point in thinking too big. You must be able to finance your real estate purchase without spending all your savings and income on it. To know how much to spend on the loan, without depriving yourself or getting into debt, it is essential to do your accounts and use the good old method of income/expense columns. The first column will be devoted to regular and secure monthly income. The second column will be devoted to recurring monthly expenses (consumer loans, pensions paid...). This will make it possible to establish the debt capacity, i.e. the money that it is possible to mobilize each month to refund the real loan.
According to the new directives of the High Council of Financial Stability (HCSF), this sum should not exceed 35% of the monthly income.

A personal contribution will be welcome

Although no text requires it, a personal contribution is the little "extra" that will change everything. It can be constituted by your personal savings (Plan d'Epargne Logement...), a donation, an inheritance, the sale of a property.... The more important the contribution is, the more you will have arguments to negotiate with the bank and the more interesting the rate will be. The banks appreciate between 10 and 20% of contribution.
Think about it! Some subsidized loans allow you to "inflate" the amount of your personal contribution (PTZ, Action Logement loan...).

Be irreproachable

Pay attention to the last three bank statements! They will allow the bank to analyze the way you manage your finances. Avoid defaults and overdrafts... A bank will prefer someone who manages his finances well rather than someone who has a large income, but who cannot save or make ends meet.

Apply for a zero interest loan

Being a first-time buyer is a major advantage. You can finance part of your purchase with a real estate loan without any application fees or interest. This is the famous PTZ, extended until the end of 2023. In 2022, the PTZ is reserved for the acquisition or construction of a new home, regardless of its location, or the purchase of an old home with work, but only in zones B2 and C, the least populated.
The amount of the PTZ is determined according to the amount of the operation, which is multiplied by a quota. The amount used for the calculation is capped, and the ceilings differ according to the geographical zones. The quota is also variable, depending on the zone and the type of property purchased.

A loan is not only monthly payments

A real estate loan is not only about monthly payments. Its cost cannot be accurately evaluated without including various unavoidable expenses. This is called the Annual Percentage Rate (APR). This includes death and disability insurance and job loss insurance. Don't forget the administrative costs (usually between 1 and 1.5% of the capital borrowed) and the loan guarantees (mortgage, lender's lien or surety). In your forecast calculations, remember to include the costs related to the acquisition: deed fees, local taxes, moving expenses, home insurance...

When comparison can be reason

Contrary to the saying that "comparison is not reason", going around the banks can help you make the right choice. Each contract of loan, even each establishment lender, will have its specificities which will perhaps make the difference. It is not useless to compare in particular the APR, the possibilities and modalities to increase or decrease the amount of the monthly payments, the conditions of an early repayment, the account management fees...
Also think about the "type" of rate that best suits you. If you are the type of person who prefers security, a fixed rate loan will suit you perfectly.
As soon as you sign the loan, you will know the applicable rate, which will not change until the end of the loan. With a variable rate loan, the interest rate is revised periodically, usually every year on the anniversary of the loan, according to the evolution of a reference index.
To limit the risks associated with rising interest rates, choose a "capped" variable rate loan, which cannot vary beyond a certain limit.

Have you thought about the broker?

If you don't have enough time to go around the banks, you can benefit from the expertise of a broker. He will compare the rates offered and advise you on how to put together your financing plan.

Marie Christine Ménoire.