Pledge, a guarantee of security for your mortgage loan.

The term “pledge” is defined in the Civil Code by the ordinance of March 23, 2006 as being “a contract by which a debtor hands over intangible personal property to his creditor to guarantee his debt”.

Guarantee a crucial element of your mortgage

An advantageous guarantee for the borrower

An advantageous guarantee for the borrower

In the event of future non-repayment, the borrower can have recourse to an alternative by giving to his bank, as a guarantee , a life insurance contract , a secure investment or anything else of value allowing the bank to finance itself.

It is a guarantee that requires very little cost. However, this is mainly reserved for bank customers, who already have a portfolio of securities sufficient to guarantee all of this credit.

After becoming aware of these various guarantees existing on the market , you will have to make your choice and choose the guarantee which seems the most advantageous in your case. If your situation allows you to benefit from a mutual health insurance fund, do not hesitate to take it. It is the most advantageous guarantee.

For other cases, it is still recommended to take a deposit as a guarantee . This guarantee is more flexible and at lower costs.

How to choose a broker?

How to choose a broker?

Choosing a good real estate broker in Paris is not an easy task. You want to meet the right person, have confidence, feel safe and above all make sure you get the best financing offer on the market . And like all types of trades, there are many real estate brokers in Paris today, so it is not easy to make your choice!

You will therefore try word-of-mouth to find out if by chance, in your entourage, someone would know a good real estate broker. Then you will search the internet and find yourself faced with a multitude of choices. Or for simplicity, you will go to an agency near your home or your workplace.

TO REMEMBER !

  1. The bank will always seek to protect itself in the case of a mortgage with a guarantee
  2. There are different types of guarantees that you will have to choose according to your borrower profile
  3. Surety is certainly the most advantageous guarantee

Borrowing money without contribution is possible and easy!

Do you have little or very little savings but still want to buy a property? Have you surveyed your bank, which tells you that your project is not feasible because you cannot provide all of the notary and warranty costs?

No worries, it is now possible to acquire a property without contribution or with a contribution that does not fully cover the costs associated with the purchase price of your property! It’s possible yes but under certain conditions, obviously ?

Borrowing without contribution is easy under certain condition.

The rule: The contribution must finance the additional costs

The rule: The contribution must finance the additional costs

As a general rule (there are exceptions!), Banks ask to finance agency fees, notary and guarantee fees as well as administrative fees from their own funds. Or about 10% of the purchase price in addition to the agency fees.

In short, most banks will agree to finance only the price of your property net of any costs, or 100% of the purchase price at most.

The reason is extremely simple: if the borrower does not repay the loan, he will seize the property to resell it, without losing the incidental costs.

Borrow without contribution: Yes, but…

Borrow without contribution: Yes, but ...

In this case, there must be good reasons for not having a contribution so that a bank can accept to lend you. This is called 110% financing, that is to say that the notary, guarantee and administrative fees are financed by the mortgage.

These cases remain rare but exist. Some banks specialize in this type of financing and others practice it from time to time but they will be extremely vigilant about your financial situation.

Several borrower profiles can obtain 110% financing, but in any event it will be strictly necessary to respect a maximum debt ratio of 33% (even for the best profiles). That is to say that all of your expenses should not exceed 33% of all of your income, quite simply.

The profiles that have a good chance of borrowing without contribution are the following:

  • Young borrowers, on the condition that they are first-time buyers and that they are considered as “potential profiles”, that is to say that their income is bound to increase rapidly. They recently entered working life and did not necessarily have time to save before buying a property, the banks understand it very well!
  • Individuals with high incomes who already have a significant property and / or financial heritage, and who can afford to invest without risk of no longer being able to pay the monthly payments on their new credit. This type of borrower will have to benefit from a significant living balance (remaining cash after payment of all their credits).
  • Investors who buy rental property and want to reduce their taxes by deducting interest from their loan. They therefore have an interest in borrowing all additional costs and benefiting from the largest loan amount.

It will be complicated, but not impracticable, to borrow without contribution if you are not in one of these three cases. Borrowing without contribution remains a rather infrequent but possible case.

It is however preferable to present a loan dossier with a contribution covering the ancillary costs at a minimum, even if it means asking your family for help. The reason is extremely simple: Few banks position themselves on 110% financing so those who do will not offer you the best market conditions but slightly better conditions, and much lower negotiating margins (especially at the level of exemption from prepayment penalties, loan modularity, interest rate and borrower insurance).

It is simply the game of supply and demand! There are many requests for financing at 110%, and very few banking offers in this area.

TO REMEMBER

  1. Borrowing without contribution is possible for certain specific profiles
  2. Only certain banks will accept to finance the purchase price and the additional costs (notary, guarantee, administrative fees, etc.)
  3. The bank offer being reduced, the conditions you will get will not be optimized at best

 

Loan out of the debt traps

One of the most common debt traps is spending money that isn’t there yet. Although you can theoretically not spend anything that is not also credited to the account, debtors in this category always find a creative way to bridge the time until the planned money arrives. Loans from friends, sometimes even bank loans, credit cards, purchase on account and non-payment of the invoice – such methods can actually work well if you keep a careful eye on the money spent and pay it back conscientiously. At this point, however, the problem comes into play. The incoming money, be it through salary, other loans or similar sources of income, is not available for the expenditure already made. Because it is important to pay additional costs such as rent payments, electricity and food costs – and of course the ever increasing debts. So instead of using the income to pay off the debt, it will be used for other things and the debt will remain

How do debts arise?

How do debts arise?

Debt from money spent that is not there yet is not necessarily the result of poor financial planning. It is much more common that the debtor does not have his needs well under control and always wants or has to buy something new. The money is not considered. In some cases, financial hardship requires such behavior. The basic income for essentials is no longer sufficient for the debtor, so he considers how he can delay the payment of important costs and less important purchases. As a result, open bills add up and new debts arise to pay them. In these cases it can often no longer be said that only the money to pay the debts is not yet there. Rather, this approach has created a real debt problem: The debts to be paid can no longer be borne by the incoming payments. It is a difficult step for many affected debtors to become aware of this unpleasant truth.

Types of debt traps:

  • Debt trap credit card
  • Debt trap smartphone
  • Debt trap cell phone
  • Debt trap home
  • Debt trap car
  • Debt trap teleshopping
  • Debt trap installment purchase
  • Divorce Debt Trap
  • Debt trap condominium
  • Debt trap overdraft facility
  • Debt trap home finance
  • Debt trap subscriptions

Now with a loan out of the debt trap!

Important: problem detection of the debt trap

Important: problem detection of the debt trap

Even before a payment plan is developed, the debtor should think about how he got into the debt trap. Is it due to consumer behavior? Is there really too little income for basic living expenses? Is there a fundamental problem with paying bills on time, even though the money might even be there? If the problem is not identified, even with a well-thought-out repayment plan, debts may arise again. Experienced and sensitive debt counseling can help to identify such developments together with the debtor and provide tips on how to solve them, even while the repayment plan is being drawn up.

How to deal with debt?

How to deal with debt?

The most pressing question about debt out of money that has not yet been there is how to deal with the debt that has now arisen. It is clear that they have to be repaid. How this can happen depends on income, cost of living and urgency of the debt at the time of trading.

Sufficient income, negotiating creditors

In the best case, the creditors are approachable and ready to negotiate, the incidents are neither with the debt collection agency nor the bailiffs and the debtor’s income is sufficient to invest something in the debt reduction every month. In the case of long-standing debts, the debt collection agency is still the better contact than a bailiff who is supposed to collect the money, as debt collection agencies are more flexible in negotiating options and less rabid. In fact, they talk about almost any payment method, as their economic success depends on not handing over the debt to a bailiff.

Low income, creditors willing to negotiate

The creditor will not be happy about a low income for the repayment. However, if the debtor shows a willingness to pay the money, no matter how low the rates, creditors and debt collection agencies often have to agree to it. It is all the more important in these cases to pay absolutely on time and never to incur further debts. It should also clarify why income is so low and whether there are ways to work on this problem.

Sufficient income, urgent debt

Debt becomes problematic when bailiffs come into play. They have very different means of collecting money than friendly letters. In any case, contact with them must be sought early, before enforcement takes place. With sufficient income, repayment agreements can be concluded for a maximum of six months. Punctual payment is mandatory, otherwise the installment agreement may become invalid.

Low income, urgent debt

In such serious cases, debt counseling should be urgently sought. If this has not yet happened, they will work out a debt and repayment plan together with the debtor. This can be presented directly to bailiffs, collection agencies and creditors. However, it can also make sense to think about measures such as an affidavit to defer the debt or a personal bankruptcy to reduce the debt over six years with subsequent freedom from debt. Decisions like this should not be taken lightly, debt counseling also helps in these cases.

Overdrafting as a debt trap.

Those who have a classic current account and do regular work generally enjoy the luxury of a so-called overdraft facility in Austria. But as advantageous as the small financial cushion may be. Once in the red, you pay dearly for the overlay frame provided by the bank. In the short term, this may not be a problem, but in the long term, overdrafting can quickly end in a debt trap. So what should you watch out for and how can you avoid the debt trap overdraft facility?

The overdraft frame – a much used bridging option

The overdraft frame - a much used bridging option

The overdraft facility (also known as the overdraft facility ) is a way granted by the banks to bridge a temporary financial bottleneck. This is made possible by an upper limit set by the bank based on relevant factors – such as regular income, financial situation, age and profession – which is available to the account holder after the account balance has been used up.

An overdraft framework is:

  • A surplus loan granted by the bank and tied to the account.
  • A loan option that is available after granting without prior application.
  • A form of credit that is granted without a KSV entry due to its special features.

Often used in everyday life and often granted automatically by banks and set up with a maximum volume of up to four times the monthly income, the overdraft framework has long been something of a “savings stocking” for those moments when the month is too long for that previously received salary. Almost every account holder has ever used the overdraft facility in their life to make spontaneous payments, pay for purchases or to bridge a financial bottleneck, and basically there is absolutely nothing to be said against using this financial opportunity.

The overdraft frame enables:

  • The flexible bridging of financial bottlenecks.
  • The financing of short-term debits for which the account balance is insufficient.

But banks do not grant the cover frame out of humanity and willingness to help. The aim of every bank is to generate the best possible sales and thus work economically. Accordingly, in addition to the advantages of a cover frame, there are also disadvantages that should always be considered.

Anyone who occasionally slips into the frame at the end of the month does not have to fear an entry in the directory of the KSV (Credit Protection Association), nor does he have to apply for a loan. As long as the account is balanced again at the end of the monthly accounting period, the overdraft facility is even an advantageous alternative for small loans. However, if you use your account framework to the full every month, you run the risk of gradually falling into debt due to interest and overdraft costs. Because a consistently exhausted account framework is difficult to balance from the point of view of interest alone with monthly income from an employment relationship.

What are the costs of overdrawing your account?

What are the costs of overdrawing your account?

Above all, it is the sometimes very high costs and interest that can arise through the use of the overdraft facility that make the account framework both a blessing and a calamity. Because if you constantly push the limits, you have to expect high interest rates and often high costs.

The most bitter truth about the overdraft facility is the interest on this financial bridging option granted by the bank. With an interest rate of 13.25 percent or even more, the account balance is truly an expensive proposition in direct comparison with small loans. In addition, there are additional fees for careless use. If the account limit is exceeded, default interest, overdraft fees or penalty fees may result.

The use of the account frame creates:

  • Interest on the funds used by means of account balances
  • Default interest in the event of the overdraft limit being exceeded
  • Possibly. Penalty and overdraft fees

With an interest rate that is often far above the interest rates of a classic bank loan, the overdraft facility is an expensive affair. In addition, if the overdraft facility is exhausted, there is a risk of further costs in the form of default interest or overdraft fees. Detailed information on the de facto interest, fees and possible fines can be found in the bank documents or requested directly from the responsible bank.

When does debt rescheduling make sense – get out of the debt trap?

When does debt rescheduling make sense - get out of the debt trap?

You read it again and again and many people in Austria are affected every day. The overdraft facility is fully utilized and can hardly be covered by the monthly cash receipts. Over a short period of time, this may be more or less justifiable. But every bank customer in Austria should be aware of one fact. If you overextend the overdraft framework for too long, it becomes expensive and often ends in the notorious debt trap.

The reason for this is the sometimes very impressive overdraft framework. Depending on the bank and region, up to four times the monthly income is possible. It doesn’t take a lot of math to figure out how difficult it can be to balance this sum of money, along with all the interest and fees that accrue. If you act carelessly, it can happen that you are in the lousy with several thousand USD.

Debt restructuring of the overdraft facility is advisable if:

  • A timely settlement of the amount owed is not possible.
  • The financial burden becomes a risk factor.
  • The bank threatens to block the account and overdraft facility until the outstanding debt is paid.

What to do if that happens? That is the big question for many bank customers. Now there are quite a few options. On the one hand, you can try to balance the overdraft limit with your own financial resources as quickly as possible and thus reduce the financial burden. Unfortunately, this is not always possible. In such cases, rescheduling is often advisable. A bank loan, for example, is several times cheaper than the bank account alone in terms of the interest charge and can therefore reduce the interest charge in the long term.

Avoid the debt trap account framework – budget ahead, reschedule early!

In order not to let the account framework become a debt trap, debt advice institutions advise you to look ahead and deal responsibly with your own finances. Pay attention to your financial circumstances. Rethink planned expenses and at best try to coordinate them in such a way that it is not even necessary to overdraw your account. Because if you don’t fully exhaust your account, you are financially on the safe side.

To protect yourself from the debt trap cover frame you should:

  • Always keep an eye on your finances.
  • Coordinate larger expenditures so that at best they can be financed without bridging.
  • Talk to your bank early on about alternatives to expensive bank accounts.

Should it happen that you use your account balance or even use it up, it is important to keep an eye on alternatives. Especially with a long-term financial need, a loan is usually always cheaper and safer for your financial situation. Get advice from your bank and find cheap and safe alternatives to permanent account usage. This saves you a lot of money and debt rescheduling is usually always possible if your bank can trust your liquidity.

In the sense, protect yourself from the debt trap overdraft facility and be sure to exchange expensive overdraft interest for cheap loan interest. Your wallet will thank you in any case!

How to get the best mortgage loan?

Obtaining the best possible mortgage depends mainly on the mortgage broker who will be in charge of your file.

Obtaining the best possible mortgage depends mainly on the mortgage broker who will be in charge of your file.

This is why it is important to entrust your real estate project to a professional, an expert. It is thanks to this approach that you will have greater chances of obtaining the best rate and the best offers for your mortgage.

Even if it is sometimes tempting to want to obtain your mortgage only, by questioning several banks for yourself, this is not the best solution. Indeed, a mortgage broker knows the current market rates by heart, knows all the banks and knows exactly how to defend your project and negotiate the best mortgage, depending on your situation. It therefore proves to be a valuable asset for this important step in the purchase of your property.

Your broker will do everything to get you the best mortgage.

But how do you find the right broker to get the best mortgage?

But how do you find the right broker to get the best mortgage?

 It is therefore now a question of finding a good real estate broker, capable of obtaining the best mortgage for you. You will naturally ask around you if someone around you has been satisfied with this type of service. You will also look on the internet at the various brokers in Paris that will be offered to you and then you may simply decide to turn to a professional near your home or your place of work. Know that all research and procedures are good to perform. What matters is the result and you are happy with it!

For your information, Lite Lender, is an expert in real estate lending and loan insurance located in the heart of Paris and systematically recommended by its customers who have had to deal with its services. This firm brings the tailor-made requirement to get you the best mortgage. Their service is quality, efficient and quick.

Their goal: to simplify the financing of your property with you and ensure a very good result, through unrivaled responsiveness.

TO REMEMBER !

  1. Finding a home loan alone is long and tedious
  2. Lite Lender will negotiate all the credit parameters for you

Real estate loan comparison – as of February 2020

The real estate loan is also known as a mortgage loan and is a cheap loan to finance dreams such as a property, house or condominium. It is the classic loan for house building and, in addition to the building loan, the form of financing to realize your own 4 walls. The real estate loan calculator here is a combination offer with icon direct. You can use the calculator and solicitation tool to finance the following options

  • condominium
  • detached house
  • Apartment house
  • Property
  • Debt restructuring of your existing property

Enter on the calculator how high the purchase price or value of the property is, what additional costs you expect (thumbs x pi this is usually 10% for brokers, taxes, contract fees, …) and how high is your own funds. At the end of the form, you also indicate the period in which you would like to repay your real estate loan and whether you also plan to have repayment-free years (maternity leave, trip around the world, unemployment, …).

If you read various offers and their websites, the following picture appears for real estate loans in 2019.

Current interest on home loans – at best

Current interest on home loans - at best

  • from 0.875% surcharge on the 3-month Euribor in the variable range (if negative Euribor value is not passed on, otherwise even an interest rate lower is possible)
  • fixed interest rate
    • from around 1.5% to 1.75% fixed interest for 10 years
    • from around 1.75% to 2.00% fixed interest for 15 years
    • from around 2.125% to 2.375% fixed interest for 20 years
    • After the fixed phase, a connection interest rate of 1% and more can be expected linked to the 3-month Euribor.

Banks only offer these services if their creditworthiness is rated as very good. Any lower credit rating results in a higher loan interest. Do you have other experiences with your real estate loan offers? Please use the comment area!

Infina is an independent consultancy and the residential finance expert for real estate finance. Infina has locations throughout Austria and more than 20 years of experience in the credit business. For those interested, Infina consultants can use products from over 100 banks.

The advantages of Infina:

  • over 90 times on site
  • Customers benefit from the size of Infina on the market
  • The aim is to find the right financing for every customer.

The company was founded in 2001. With almost 1 billion USD of successfully brokered financing in 2019, Infina is the market leader in Austria in the free provision of private real estate financing.

How much own funds do I need?

How much own funds do I need?

There is no generally applicable answer here, because the banks themselves have different requirements and also take individual circumstances into account. A rough guideline is a lower limit of 20% or 30%. It hardly makes sense below that. For example, in the magazine “ Profit 2/2018 ” various banks were asked how high their own funds should be and Bank Austria stated 30%, while GAWBA stated 10 to 20% of the financing amount and even less if the affordability was shown can. It sounds very tempting to get a real estate loan with little own funds, but the bank doesn’t give you anything and the higher the loan amount, the longer you pay back, or the higher the monthly installments.

If the own funds are too low, it can make sense or the bank will like it if there is a co-borrower. Banks like to think of parents, but be careful, as a co-borrower you are right in the middle of a loan!

What is the maximum term of a real estate loan?

What is the maximum term of a real estate loan?

Until recently, the maximum term of a real estate loan was usually still 30 years. Now there are longer runtimes. Some banks, but also building societies, allow a term of up to 35 years and in exceptional cases even 40 years are possible. What are 5 or 10 years more in terms of term for a property? But that’s a lot. First of all, note the age at which you are considering buying a property and thus a loan. This is usually the phase of life between 30 and 40 years. With a 30-year term, you are at the very end of your professional career. What about a job then? The rest is created by the compound interest effect, which makes the loan massively more expensive. A small calculation example.

  • Loan amount: 200,000 USD
  • ø Interest rate over the entire term: 3% nominal

How high are the interest payments then?

  • Term over 20 years: ~ 120,000 USD
  • Term over 25 years: ~ 150,000 USD
  • Term over 30 years: ~ 180,000 USD
  • Term over 35 years: ~ 210,000 USD
  • Term over 40 years: ~ 240,000 USD

You see, with every 5 years more term – the loan amount of 200,000 USD remains the same, the burden of interest increases with an interest rate of 3% by a further 30,000 USD.

Current status of real estate loans

Current status of real estate loans

However, the National Bank has now brought developments to the fore, which in turn is concerned and is passing this concern on to the banks. The advice of the bank is not to take too big risks from the bank’s point of view. B. higher own funds are required or the interest rate is higher because a higher risk is priced in here. As can be seen in the article on Standard, housing loans in Austria and prices have been increasing since 2010 – the bottom line is that prices have increased by 50% and that’s a lot! As a borrower, you should make sure that you take out a fixed-interest loan, because in the event that loan interest rates rise again, there could be a bad awakening. With a fixed interest rate over the longest possible term, you are on the safe side that there will be no surprises when interest rates change.

Mortgage loan from August 2016 

Mortgage loan from August 2016 at 7 Viennese banks

In 2016, AK Wien carried out an investigation into the cost of mortgage loans from Viennese banks. The initial situation was the need for USD 200,000 mortgage loan with a term of 25 years. The bottom line of the comparison with these 7 Viennese banks showed that there is a lot inside and it is important that the effective loan interest rates are compared with each other, because there are a few positions where you can and should negotiate so that the bottom line is that the lowest effective loan interest rates arise ,

Here are the results of the loan comparison:

Sufficient creditworthiness:

  • variable debit interest rates from 1.375 to 2.125%
  • Processing fee at 1 to 2%
  • Account maintenance fee per quarter between 6.76 and 20 USD (results in a difference of 1,324 USD over 25 years)
  • One-off costs such as B. Real estate appraisal costs

Best credit rating:

  • variable debit interest from 1.125 to 1.500%
  • Processing fee at 1 to 2%
  • Account maintenance fee per quarter between 6.76 and 20 USD (results in a difference of 1,324 USD over 25 years)
  • One-off costs such as B. Real estate appraisal costs

Result of the AK investigation:

The cost differences between the different banks amounted to an impressive 20,000 USD in the study in 2016 with a loan amount of 200,000 USD ! The banks have adjusted the conditions to a wide variety of parameters in order to make them more difficult to compare. The effective interest rate and the total costs, however, transparently inform which loan is the most expensive in the end.

Foreign currency loan for real estate

Foreign currency loan for real estate

What still often happened in the 90s and 00s is now no longer available or can only be obtained under certain conditions, a foreign currency loan! Due to the low interest rates on the Swiss franc or yen, many home builders have obtained a foreign currency loan and at the latest with the financial crisis there was a bad awakening. It was particularly bad for those who have or had a final foreign currency loan and fund insurance as a repayment vehicle.

The exchange rate to the USD was contrary to expectations and the repayment vehicle did not develop as hoped. In the past 10 years, many banks have therefore asked for additional collateral, borrowers to keep repaying the FW loan and other measures to minimize the credit risk. The financial market regulator has asked banks to reduce existing foreign currency loans and to no longer grant new foreign currency loans. If you still want to have a foreign currency loan as a private person today, you will have a hard time or have to meet numerous requirements so that it actually works.

The constitution of your loan file.

As soon as an offer to purchase has been signed, your advisor will then send you by email the list of documents required to compile your loan file.

The first step of your investment project is the loan simulation

The first step of your investment project is the loan simulation

It is at this point that your advisor will take special care to explain all the components of a loan to you, not only being limited to the interest rate but also to all the other additional conditions (insurance rate, prepayment penalties, etc.).

After the constitution, the file verification stage

After the constitution, the file verification stage

Once the simulation and the financing plan have been validated, your advisor will then check that your paper file is complete to send it to the banks.

It will therefore put several partner banks into competition, negotiate and defend your real estate project in order to obtain the best financing offer on the market.

The simulation of the loan before the constitution of the file

The simulation of the loan before the constitution of the file

Upstream of all these steps, you can also get a quick idea of ​​the calculation of your home loan. You just have to make a loan simulation, which you will find on many websites but in particular on the Lite Lender website. 

A simulation which will only take you two minutes and will allow you to have an approximate idea of ​​the monthly payments to be reimbursed. You just need to enter:

  • The overall amount you wish to borrow
  • The interest rate selected via an updated proposal of the rates currently offered on the market
  • The loan period you want (15, 20, 25 years, etc.)

However, this simulator does not allow you to check the real feasibility of your project and will only give you an approximate idea. Following this simulation, it is therefore essential to contact your mortgage broker to refine your search and obtain a precise result.

You will understand, you cannot do your mortgage calculation alone without having a real knowledge and expertise of the needs. Do not hesitate to turn to a professional and let yourself be supported throughout this process!

TO REMEMBER !

  1. First of all you must make a loan simulation of your project
  2. Have your project checked by a broker
  3. As soon as your project is financable, have your loan file assembled by a broker