With the increase in mortgage rates, the question is the duration and amount of the loan. Should the debt burden be reduced by releasing all their savings? Not sure.
If you are a poker lover, the all-in has no secrets for you. But when it comes to real estate credit, what strategy to adopt? Are you putting all your savings on the table to borrow as little as possible or, conversely, to borrow as much as possible? The question is worth asking, especially in this period when real estate taxes are on the rise.
For Mal Bernier, spokesperson of the broker Meilleurtaux, the answer is clear: The reality is that lending rates, even if they hover around 2%, remain very low with inflation being much stronger, so borrowing as much as possible remains the most interesting option. A vision shared by Pierre Chapon, co-founder of the Pretto broker: Despite the increase, if we look at the long term, the rates today remain very attractive.
Real interest rates are still negative
While interest rates on home loans are fixed, those on our savings products change with inflation. Calculated at 5.9% over 12 months in June according to INSEE, this affects many families, but also affects your savings. For the time being, global savings returns have not yet increased, but logic will progress in August, supports Pierre Chapon. If we compare mortgage rates to the return of savings, it usually remains more interesting to borrow as much as possible. Real interest rates remain negative.
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The rule would therefore always be to put as little personal savings as possible. In fact, today, many people are all the same forced to dip into their savingsor because their borrowing capacity has decreased with the increase in interest rates, or because otherwise the project is not viable, tempers Mal Bernier.
Obligation observed since the implementation of the new norms that impose, except for exceptions, a debt ratio that does not exceed 35% for a maximum period of 25 years. Some borrowers are forced to put more so that the monthly payment is not too high. If we have observed an increase in the personal contribution in recent years, it is not because the banks ask for it, but to go below this bar of 35%, confirms Pierre Chapon.
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Limit your personal contribution
Those who have a choice, on the other hand, will be advised not to go beyond a certain limit. If most borrowers who want to buy their main residence must come up with a personal contribution of 10% to cover ancillary costs (application fees, notary fees, etc.), adding a little more is a good idea. There are banks that offer a bonus rate if the borrower presents himself with the application fee of 10% plus 10% of the value of the property, asks Pierre Chapon. Bringing up to 20% of the value of the property can be interesting, but apart from that, the rate does not change much.
It would therefore be better to keep your money for an impromptu expense such as a boiler change, for work or for a future real estate project: Keeping savings is the possibility of making a contribution for a rental investment, recalls the co-founder of Pretto. To put more than necessary on a first real estate project would be a shame, it can prevent you from doing a second one.
Whatever your decision, you will be required to maintain a precautionary savings to face a hard blow. It is therefore recommended to set aside the equivalent of three months’ salary, on a notebook A for example, where the money is easily unlocked.
Real estate loan: find the best rate