The rate of a mortgage corresponds to the remuneration of the lender . It depends directly on the combination of two factors:
- The conditions of the financial markets and the level of trust that the banks grant each other. At the height of the financial crisis, this level of confidence was so low that the banks ended up paying much less.
- Items included in the analysis of the file such as the duration of the loan, the amount of the personal contribution, the level of professional income or the debt ratio of the borrower and guarantees.
It applies directly to the principal borrowed throughout the loan period. It defines directly the monthly deadline which contains:
- A portion of amortized capital, ie the amount of debt that is repaid each month to the bank.
- The interest portion attached to it.
The amortization table decomposes for the duration of the mortgage, the monthly payment and gives all the details.
Fixed or variable?
under a fixed rate, depreciation can be either progressive (as is the case for most loans) or constant. This last formula makes it possible to amortize each month the same share of capital but is only very little used. The general fall in fixed rates over the last two years is in their favor.
Variable lending allows for more advantageous conditions, at least initially. They are most often based on the Euribor 3 month interbank index that measures the confidence that agree the largest European banks.
The current formulas often include security “locks” such as the cap rate which sets an upward ceiling or constant maturity that allows any increase to be passed on over time and not the monthly payment.
In recent years, banks offer a “mixed” two rates. The loan starts with a fixed rate over a chosen period and then the rate becomes variable until the end.
How to negotiate the best with the banker?
The negotiation of the terms of a loan depends on the different elements that make up the file and on the bank’s interest in its future client. Clearly, the better your record, the better the conditions. Be aware that the bank conducts a comprehensive analysis of your situation. It relates to:
- The level and stability of professional income
- The personal contribution rate. The level of debt and the rest to live
- The good performance of bank accounts (no overdrafts or payment incidents).
- The presence of savings accounts.
With or without insurance
The most effective solution for studying two loan offers is to compare the TEG of each of them. If you do not have these items, be sure to keep only those proposals with insurance whose contributions have a heavy impact on the cost of credit.
The different terms used
Objective comparison indicators
Banks have the obligation to indicate the TEG in the prior offer of home loan. This indicator is the only element of analysis that makes it possible to take into account all the costs that impact the cost, ie the interest on the loan, the insurance contributions, the filing and guarantee fees. .
All advertisements and offers of consumer loans issued from 1 January 2011 must indicate the APR , which is neither more nor less than an annualized TEU, even if the method of calculation differs.
Proportional rate or equivalent?
The concepts of proportional rate and equivalent are based on the calculation of simple interest and compound interest. In the context of a home loan, only the first one will be used to calculate the monthly installment found in the depreciation schedule. It is simply the annual rate divided by 12. The second is used to calculate the return on investment transactions and refers to the compound interest formula.