The conventional mortgage loan limits the financing of real estate projects to the tune of 60 to 80%. The rest must be provided by a personal contribution from the borrower. However, there is a home loan formula that can cover up to 125% of the total loan. What is it and how do you qualify for this total loan?
125% loan, a loan without contribution
As mentioned earlier, the 125% loan is a loan that relieves the borrower of the provision of personal contribution. The personal contribution is generally intended to cover the costs incurred by the credit and the real estate financing. It covers in particular the costs of the file but also the emoluments of the notary during the constitution of the mortgage. The total loan can also cover possible renovations. It should be known that each credit institution fixes the part covered itself. In fact, despite the 125% credit designation, the loan can be limited to 120 or even 100%. This type of total loan is mainly aimed at young first-time buyers who do not yet have a sufficient reserve of money.
The conditions required to benefit from a total loan
Total credit offers are not intended for the general public. It mainly targets borrowers with the best financial situation. The banks and credit institutions which offer this type of loan require in particular a stable professional situation with prospects for development and a high level of salary. To be eligible for the total loan, the borrower must have had a permanent employment contract for at least twelve months.
The borrower must also have a reasonable debt ratio. Remember that the tolerable debt threshold is legally set at 33% of income. It is therefore necessary to clear your commitments before applying for a loan 125. The number and size of outstanding loans should not weigh heavily on the borrower’s budget.
Each time an organization receives a loan request, it has the obligation to open an investigation. He must notably check the borrower’s financial history, a previous banking ban considerably reducing the chances of obtaining credit.
The interest rate on a total loan
The total loan is a special loan that involves more risk for the lender. As a result, its interest rate is significantly higher than the conventional mortgage rate. Count an increased rate around 0.5% compared to a normal mortgage. This difference may seem little on paper but with a credit spanning 25 or 30 years, it is important. It is therefore imperative to compare well in order to choose the most suitable offer. This rate will also change depending on the duration of the loan and the guarantees offered by the borrower. It is up to the borrower to negotiate his case well. The intervention of a broker is not useless if you wish to obtain the contract at the best conditions.