Early repayment of a home loan and allowances

What the law says

Article L312-21 of the Consumer Code amended by Law No. 99-532 of 25 June 1999 on savings and financial security entitles the borrower to make a repayment of his real estate loan by anticipation at any time and thus unilaterally break his contract.

In case of partial repayment, the legislation allows the credit institution to require a minimum amount of repayment of the mortgage loan of 10% of the initial loan. The borrower must further inform the lender of his intentions by registered mail with acknowledgment of receipt and comply with a 30-day notice.

In addition, the bank may request an early repayment indemnity in respect of interest not collected, the amount of which may not exceed a limit fixed by decree. In addition, the methods for calculating the indemnity must be included in the loan agreement.

At present, the maximum allowed by the Law is 3% of the outstanding capital shown in the amortization table.

For loans taken after July 1, 2009 , the law prohibits the payment of a penalty if the early repayment of the real estate loan occurs in the following cases:

  • Sale of the principal residence following a professional transfer.
  • Forced cessation of activity (dismissal or disability)
  • Death
  • Job Loss.

These cases apply to both the borrower and the spouse.

Case of the default of the borrower

money borrower

Article L312-22 of the Consumer Code clearly states that in the event of default by the borrower , the bank has the right to increase the interest rate on the loan until the borrower resumes payment of the monthly payments. This increase, however, has a limit fixed by decree.

In addition, the lending institution has the right to require the immediate repayment of outstanding capital and accrued interest, plus default interest. This situation does not prevent him from claiming further compensation for damage (limited by decree), in addition to the various costs that the recovery procedure would have occasioned.

Calculation of prepayment penalties

Calculation of prepayment penalties

The calculation clause of the prepayment allowance for the real estate loan must be specified in the loan offer and clearly indicate the legal limit. This is often equal to one semester of interest on the amount reimbursed in advance calculated at the average loan rate, but limited to 3% of the outstanding capital.

The case of relay and loans

An exception is made for certain loans. These are bridge loans and zero interest loans that can be repaid without notice or penalties.

To read also on credit
  • The overall rate of charge
  • Buy a home loan
  • The dry relay loan

Purchase of real estate through a notary

The purchase of his house by a notary

Know that it is also possible to make the purchase of your house by a notary.
Indeed, some notary firms occasionally practice real estate trading .

As the activity is regulated, the notary must however hold a sales mandate from his client .

Why buy real estate by a notary?

real estate

If you decide to buy your home using the services of a notary, you will benefit from his expanded skills and his perfect knowledge of the local market.

In addition, a notary office knows the prices generally practiced in the sector where you are looking for your home.

Because it perfectly masters the regulations in force, the notary is able to provide you with sound advice on the best patrimonial and tax choices available to you and to help you access the property.

Remember that as a ministerial officer, the notary must respect a certain deontology and will be demanding in the transaction so that everything is carried out in the most perfect transparency.

One contact person for all stages of your real estate project

One contact person for all stages of your real estate project

If your purchase of your house is done by a notary, you will have only one interlocutor throughout the realization of your real estate project. From the search for good to the authentic deed of sale through the sales agreement.

Case of the life purchase

cash purchase

It is a real estate market still atypical in France and much less used than in the Anglo-Saxons. But the life purchase makes the role of the “ministerial officer” even more important, given the complexity of this type of acquisition.

If, in the case of a life annuity free the only point to be paid is to set the amount of the bouquet, it is not the same in the case of a life annuity.

We advise to consult a notary, even if you buy through a specialized real estate agency.

Other articles on real estate

  • Investment in a student residence
  • Choose a builder
  • What advantages to buy in the country of Gex
  • The different clauses of a sales agreement
  • Legal value of the visit voucher

Investment in a student residence

A wise investment

Investment in student residences has become an interesting investment because of the student housing crisis. Indeed, with barely more than 150,000 university housing for 2.2 million students , France is struggling to accommodate its students.

student loan

Insufficient government supply creates an imbalance between supply and demand.

The other factor that favors investment in student housing comes from the explosion in private rent prices and the level of collateral required by landlords.

Finding accommodation for a student without the parental surety is particularly difficult at least at an affordable price.

The benefits of investing

The benefits of investing

This type of investment gives the status of lessor furnished. The tax benefits depend on the status you choose.

  • If you opt for the classic LMNP scheme, the activity comes under the BIC and not the property revenue, but in the end, you report almost no revenue.
  • If you opt for the SCELLIER device (possible until 2012), you will benefit from a tax reduction of 25% over 9 years up to a limit of € 300,000.

On the other hand, the initial investment is lower than for traditional housing. One can easily find student residences for less than 60 000 €.
Finally, you recover the VAT of 19,60%.

Financing of the student residence

Financing of the student residence

The financing of your rental investment will be carried out in a traditional manner with the same difficulties as for any tax exemption operation under the SCELLIER law. You will be able to compete with different banks and compare different mortgages.

Our advice: attention to the reassuring speeches of promoters, asset managers or all those who market this type of products and who present you the investment in a student residence as a simple savings operation.

This is a real estate investment first and foremost and like any real estate investment, the choice of the developer as that of the choice of residence is essential.

2013 variable rate capped for a real estate loan

The elements of the revisable loan

The variable rate loans proposed in 2013 have nothing to do with the banking proposals of a few years ago. But if the offers of banks significantly limit the risks incurred by the borrower , they do not provide the same security as a fixed rate proposal.

The benchmark

The operation of the floating rate is based on a financial index on which it is indexed. Depending on the price of this index, the rate will rise or fall. The 2013 banking proposals mainly use Euribor . This index serves as a basis of exchange between the most important banks. The three-month Euribor is currently the most used.

The margin of the bank

bank loan

The second element that enters into the calculation of the variable rate, the margin of the bank is in some way the profit that the latter will draw from the operation. Today, margins seem lower than a few years ago.

However, there will be competition because the difference may be significant from one organization to another. Do not hesitate to ask the question to your banker because it is rare that the one approaches the subject. You will nevertheless find the information in your loan offer.

To summarize a revolving rate credit, it is:

Capped loan

cash loan

One of the security features of variable rate loans proposed in 2013 is the cap. A capped loan can not therefore exceed the ceiling set in the loan offer. Thus, the mortgage capped + 1 or + 2 can not exceed more than one point or two points the rate initially set.

The fixed deadline

Another element tending to secure revolving rate loans is the possibility of keeping the monthly payment fixed for the entire duration. Thus, if the Euribor index rises, the duration will be lengthened, allowing the borrower to keep control of his budget .

The controllable rate

loan rate

In March 2008, a report by MP Frédéric Lefebvre led to a strengthening of the regulations. Now, if your bank offers you a pure revisable loan, it must present you in parallel a loan rate controllable , that is to say either a fixed rate credit or a capped adjustable rate.

It will also have to establish a simulation showing the amount of the payments you will make over the total duration of the loan.

As can be seen, the variable rate loans proposed in 2013 may be good alternatives to fixed loans provided that they are vigilant. Take advantage of fixed-term loans to keep control of your budget.

Do you need to negotiate debts? Are you up to your debts and need to negotiate?

If you are having problems to pay the debt you have with your bank. Surely, you wonder what happens if I owe money to the bank or if I receive a subpoena for my debts. Do not worry! In this post today, we are going to give you 7 steps to follow so you can negotiate your debt with the bank .

  1. Ask for the CIRBE report

Ask the bank to get you this report to see reflected all your operations and the exact situation of your account. The more aware you are, the better you can negotiate your debts .

  1. Check if you are on the list of defaulters

It is very important that you know if you are on the list of defaulters to be able to decide how much money you can be seized and study your case better.

  1. Study the status of your payments

It is recommended that you be 100% aware of what your situation is with the bank’s debt . In this way, you will be in a better position to negotiate with the bank .

  1. Gather approximately 30% of your outstanding debt

    Gather approximately 30% of your outstanding debt

Now that you know how much money you can get, try to collect 30% of the debt you have pending to renegotiate it.

  1. Do not give more information than necessary

When you sit down to negotiate with your bank about the renegotiation of the debt, do not forget that they are not your friends, so do not give more information than strictly necessary. They probably use it against you.

  1. Negotiate the conditions in writing

Another very important point is that the conditions are put in writing, since the validity of a verbal contract is null. So if you are negotiating your debt, you must make sure everything is in writing.

  1. Do not sign anything without talking to a lawyer

As in any other thing in life, consult an expert on these issues to help you and advise you, as it is a complicated issue and you should be informed. Go to a specialist lawyer to advise you in everything you can.

 

Down payment of 20% to avoid insurance: not always financially advantageous!

Do you make big financial efforts to raise the necessary 20% down payment ? Do you want to avoid the hassle of having to take out a mortgage with CMHC or Genworth? Yet what is sometimes a sacrifice may prove counterproductive financially. Explanations.

mise de fonds

Down payment of 20% = money saving? Not always true

The law requires buyers of housing, via a loan, to take out mortgage insurance through accredited bodies. Like CMHC, Genworth, or Canada Guarante. In the event that a down payment of at least 20% has not been made. The price of this insurance varies between 2.8 and 4% of the mortgage loan. Therefore, it is a big budget. It therefore seems quite logical to want to escape this constraint by making all the necessary efforts to constitute the required down payment.

Down payment of 20% = money saving? Not always true

Such reasoning forgets, however, to take into account other financial parameters. These include the rates offered by lenders for insured and uninsured mortgages, which vary.

An insured mortgage is less risky, so the rate is lower

An insured mortgage is less risky, so the rate is lower

A mortgage that is insured presents a lower risk compared to an uninsured loan. And, the down payment is not a factor taken into consideration in this context. The rate differential therefore sometimes makes it possible to cover the price of mortgage insurance. As a result, the loan will be cheaper without a down payment!

However, the situation must be assessed on a case-by-case basis. Not only do the differences in rates vary by region, but the amount borrowed must also be taken into consideration. The real estate market in Quebec has not been overheated in Toronto or Vancouver. Then, it is less risky and subject to a tighter spread (about 0.2%, more than half that in Toronto). Nevertheless, this lower rate makes it possible to finance a large part of the cost of insurance. In the end, the savings are minimal.

More financial latitudes

Even assuming that the difference in rates between insured and non-insured loans does not cover the full cost of insurance, not putting up another down payment presents another benefit. Namely the possibility of benefiting from wider financial latitudes. We have already explained to you that the federal government has tightened the conditions for access to the mortgage by putting in place a stress test. In short, you need to demonstrate that you have the financial capacity to repay monthly installments by taking into account a 2% increase in your interest rate. The prospective buyers who insure their mortgage without advancing the down payment of 20% with a lower rate, the resistance threshold is mechanically lower.

In conclusion: do not bleed to advance the down payment

If you can afford it, putting 20% or more down payment is not a problem. On the other hand, if it risks putting your finances under stress, it is in your best interest not to make the effort. Instead, use your reserves to deleverage yourself and improve your credit rating (by paying off the debts that have the highest interest rates first). 

Debts that do not appear in the loan history

Debts that do not appear in the credit history

More than half of Mexicans (64.7%) say they know their credit history and have good references in the Credit Bureau, according to a survey conducted by service comparator Coru.com and market research company Brad.Feebbo in 2017 .

Debts that do not appear in the credit history

The two entities that evaluate the credit history in our country are the Credit Bureau and the Credit Circle: both concentrate the information about the payment behavior of people with credit cards as well as users of loans and other types of credits.

However, there are certain debts or financial behaviors that are not recorded or affect the credit history. Take note if you are in any of these cases:

Debts that do not appear in the credit history

Payroll credits

# 1 Payroll credits

It refers to the loans that are granted exclusively by your work, which are deducted via payroll, and which are supported by the company where you work, which does not function as a credit institution and therefore has no relationship with the Credit Bureau. .

Loans granted by pawnshops:

# 2 Loans granted by pawnshops:

Pawn shops do not function as a financial institution of credit, so these types of loans are handled and regulated differently.

Debts with family or friends:

As individuals, lenders do not have any kind of relationship or agreement with the Credit Bureau, so this type of information will not appear in your credit history.

Transit fines

# 4 Transit fines:

The payment of the fines depends on each entity of the Republic and generally the payment of the debt is a requirement when carrying out the verification of the vehicle, the sanction for it is often paying a greater amount for the infractions that are had.

Remember that having a good credit history helps you open better financial opportunities in the medium and long term, however having debts that do not appear in the record is also an important commitment to attend, in any case, if you do not pay on time almost you will always end up paying more, either in surcharges, fines or else, the relationship with your lender will be affected.