Mortgage: Discover the 6 winning numbers.

The opportunities to be happy by taking out a mortgage are far greater than playing the lottery! There are 6 key figures to aim for. Let's take the opportunity to find out all their secrets, so you can be sure of signing up for a great loan offer.

1.20% - A very attractive average lending rate

November saw a further fall in the average lending rate. It stands at 1.20%, down from 1.27% in June, according to the Observatoire Crédit Logement / CSA. This reduction reflects the banks' determination to support demand for mortgages. Indeed, while the successive confinements have not dampened households' desire to buy, the number of loans granted fell by 18% over 11 months to the end of November. Against this backdrop, banks are likely to reopen the credit tap in order to achieve their commercial objectives.

Our advice

Take advantage of this favorable environment to borrow: you can obtain a loan averaging :

- 1% for a 15-year loan,

- 1.20% over 20 years,

- 1.40% over 25 years.

35% - The maximum level of indebtedness

This is a figure that has caused a lot of ink to flow, as it led to loan refusals in 2020! But with the new recommendations of the French High Council for Financial Stability (HCSF), issued at the end of December, banks can now accept a debt ratio of 35%. Having been lowered to 33% a year ago, many young households were no longer able to access property because their debt ratio exceeded this 33% ratio. This threshold is somewhat arbitrary, since it takes no account of income levels. Indeed, the equation is quite different depending on whether a family earns €8,000 or €3,000 a month. This new opinion from the HCSF is a breath of fresh air for buyers, especially first-time buyers.

Our advice

If your level of indebtedness is just over 35%, don't hesitate to put a little more money down to make your real estate project a reality.

15% - The average down payment

Gone, or almost gone, are the days when banks would lend up to 110% of the cost of the project, including notary fees. Today, the effects of the health crisis are having a direct impact on our financial health. Our financial health has been weakened, and we're having to dig deep into our pockets to finance a property. In fact, the amount of the personal contribution represents at least 15% of the cost of the project, and ideally even 20%. Once again, this penalizes young households who have not been able to build up sufficient available savings. To remove this obstacle, real estate industry players are proposing an increase from 15% to 30% in the rate of exemption from the 33% rule for loan production.

Our advice

Open a home savings plan (PEL) as soon as possible, to build up capital that can be used as a downpayment.

27 years - Maximum mortgage term

Yet another recommendation from the HCSF, inviting banks to authorize loan repayment periods of up to 27 years. The 25-year rule applied in 2020 resulted in higher monthly payments. Taking a €180,000 loan at 1.33% as an example, this represents a monthly payment of €760 over 25 years, whereas it falls to €716 over 27 years. Of course, extending the term increases the total cost of borrowing, but for some young first-time buyers, it enables them to meet the 35% debt limit. This means that the banking sector will be willing to finance borrowers who were refused a loan in 2020.

Our advice

Don't necessarily look for the solution in the repayment period, but focus on lowering the cost of the project and maximizing the amount of the personal contribution to avoid excessive interest charges.

0.36% - Average borrower's insurance rate

Here's an important parameter that benefits young borrowers. In fact, for a person in good health, the insurance premium doubles between the ages of 25 and 50, with significant jumps in rates around age 45 and over age 60. Borrower's insurance covers the mortgage in the event of death or illness, for example.
While the average rate is 0.36%, it varies widely depending on the age of the borrower and the type of contract. Under French law, you can take out insurance with an organization other than your bank's group contract. In this case, you should opt for delegated insurance, which is to the advantage of young borrowers, since health problems are more limited. For example, for a loan of €250,000 over 20 years, the www.quechoisir.org website has drawn up a comparison between bank insurance and an alternative formula. A 35-year-old borrower would see the total cost of insurance rise to €18,600 with his bank, whereas he could hope to find a competitive offer for just €3,500 - a saving of €15,100!

Our advice

Take advantage of the right to delegate and cancel your loan insurance contracts annually to renegotiate your level of cover and rates.

3% - Early repayment indemnity

When buying or selling a property, it may be worthwhile to pay off the current loan and take out a new one. If the borrower is able to repay part of the loan early, prepayment penalties may be payable. The contract may provide for the payment of an indemnity which may not exceed :

- 6 months' interest on the capital repaid early, at the average rate for the loan,

- and 3% of the principal outstanding before early repayment.

To avoid early repayment, the solution may be to take out a bridging loan. This gives the buyer an advance on the future sale price. Ranging from 50% to 75% of the estimated value of the property to be sold, the amount of the bridging loan is a sort of cash advance. The term of the bridging loan is up to one year, and can be extended to two years in certain cases.

Our advice

Ask your banker or broker for the solution best suited to your situation.

Christophe Raffaillac