What is a mortgage

You want to buy accommodation :

• Your first house or apartment
• Land to build the house of your dreams
• Invest in real estate

To finance such a purchase, most people resort to a home loan.

A mortgage is a bank loan intended to finance:

• The purchase of real estate (apartment or house) as well as any repair, improvement or maintenance work on this property
• The purchase of land intended for the construction of a home
• The construction of a home

You must repay this credit during a defined period, for interest which is intended to remunerate the banking organization which lent you the money.

Why take out a home loan

Here are the main reasons for taking out a home loan:

• Buy your home today without having to advance funds . Sometimes, it is even more interesting to take out a mortgage to finance your home than to use your available funds.
• Replace the rent payment by the monthly payment of your loan knowing that you are the beneficiary of this rent since you are the owner of your home.
• Being able to spread out the payment of a large investment while keeping your savings for other expenses, dealing with unforeseen events or investing in other lucrative investments.

How the mortgage works

The mortgage is a bank loan with the following general characteristics:

• A specific amount granted depending on the price of the property and your situation (salary, type of contract, existing savings, etc.). There is no maximum amount.
• A long repayment period.  On average 20 to 25 years but can go up to 30 to 35 years.
• An interest rate defined by the bank. It can be fixed or variable.
• A personal contribution that represents part of the money in your possession that you will invest in your real estate purchase. This is your available savings (livret A, PEL, etc.) and your savings. Some institutions grant home loans without personal contribution, but most require a minimum. The personal contribution is generally between 10 and 30% of the total of your real estate purchase. The more important it is, the less your home loan will cost you.
• A loan guarantee . The lender will ask you for guarantees in the event of default. The most common guarantees are the mortgage, the privilege of money lender and the bank guarantee. See the Guarantees section of a mortgage for more information.
• A borrower insurance . The bank usually requires insurance to secure the loan against the risk of death or disability. You can purchase insurance from the insurer of your choice. See the Mortgage Loan Insurance section for more information.
• Application fees which represent the cost of constitution and analysis of your credit application file. In general, it amounts to 1% of the borrowed capital.
• A monthly payment , the amount of which is established in the loan contract. This is the amount that you will have to repay each month to the financial institution.

Guarantees of a mortgage

You have the choice between three types of guarantee :

1. Mortgage
2. The privilege of money lender (PPD)
3. The caution

This guarantee is mandatory and incurs additional costs . You must therefore choose the one that is most suited to your situation.

Mortgage

The mortgage is the most common guarantee chosen by borrowers.

It allows the bank to seize the accommodation, sell it, and reimburse itself with the sum obtained in the event of non-payment of monthly installments.

The mortgage must be drawn up by a notary and must be published in the land registry office.

The privilege of money lender (PPD)

This guarantee must be drawn up by a notary and published in the land registration service.

Its cost is lower than that of the mortgage and it is exempt from the land registration tax.

The privilege of lender of money can only guarantee real estate loans financing the purchase of a home already built or of land .

He therefore cannot guarantee the part of the loan that finances the construction of the house.

The bank guarantee

The bank guarantee works differently .

It is also the cheapest guarantee because it requires a simple writing which does not have to be drawn up by a notary.

A specialized establishment or a third party acts as guarantor for you in exchange for a contribution (in the case of a specialized company in particular).

Home loan insurance

The organization will most certainly offer you an insurance offer when setting up your real estate bank loan file.

You do not have to accept it and you can choose insurance from the insurance company of your choice.

You can also choose to insure yourself against the risk of job loss as well. This guarantee is optional.

Types of mortgage

In this article, we have introduced you to the most common credit: the classic home loan (free bank loan).

This allows you to finance the entire purchase price of your property.

However, you can obtain additional loans with your mortgage, depending on:

1. Your profile (income, family situation, etc.)
2. The characteristics of the property concerned (area, surface, etc.)

The loan (s) to which you can claim depends on the nature of your acquisition (new or old housing, main or secondary residence or rental investment) but also on your situation .

Most of these loans have specific access conditions and some only represent a complement to the traditional bank loan.

Here are the different types of mortgage:

• Zero interest loan (PTZ)
• Home savings loan (PEL)
• Social home loan (PAS)
• Housing loan
• Agreement loan
• Civil servant loan
• 0% loan from local authorities

Tips for making a mortgage

This is why, before taking out a home loan, it is important that you think about and take into account the elements below.

To take out a real estate bank loan is to get into debt in the long term .

Therefore, you need to think carefully before committing to such a contract because:

• You will have to ensure the repayment of your monthly payments for several decades
• Even in the event of a financial unforeseen or job loss

Like any loan, a home loan costs money . In particular, you will have to pay interest, insurance, administration and guarantee costs.

In order to obtain the most advantageous mortgage loan, We recommend that you compare the loan offers and use the Annual Global Effective Rate (APR) as a comparison criterion.

The APR includes all the costs of the mortgage bank loan.

Disadvantages of mortgage

You should also be aware of the constraints that a mortgage involves, especially if your purchase will serve as your main residence:

• Difficulty moving  because it is not always easy to sell a property
• Difficulty changing jobs. Since you must ensure the repayment of your monthly payments, you will not always be able to be open to all the opportunities available to you.
• A more rigid budget . As the monthly payments must be paid, you will probably have to limit certain leisure activities.

How to make a mortgage

To make a mortgage, you must follow the following steps:

1. Apply for a car loan on our site
2. Fill out the housing loan application forms
3. Each organization studies your request and comes back to you with an offer (if they accept your request)
4. You compare mortgage offers
5. You complete the files and negotiate
6. Once you have found the mortgage that best suits your needs, you sign the final contract.
7. You can buy your property !