How to prepare your mortgage loan

Very often, households cannot self-finance the acquisition of real estate. They then use a mortgage, in order to spread the payment of said property over many years. But then, how can you best prepare your mortgage loan file?

 

Clean up personal cash flow

money loan

Before even claiming a mortgage, it is very important to take stock of your cash flow. Indeed, we must not forget that banks are very picky about the creditworthiness of their borrowers.

So there is no doubt that she will look at the bank account statements first. One thing is certain: a borrower who is often in the red will have little chance of having his mortgage granted.

We must therefore ensure that we achieve a slight savings each month, however small it may be. This attests to your maturity in terms of financial management, which tends to reassure banking establishments.

 

Plan a personal contribution

personal loan

The other way to reassure the bank about your willingness to repay your mortgage is through personal contributions.

This is an amount that you agree to pay, to start the loan repayment immediately. For example, a borrower who claims to 250,000 dollars and who concedes to 20% of personal contribution already undertakes to pay 50,000 dollars in the framework of the mortgage.

Banks see this personal contribution as an important indicator of confidence, since borrowers rarely backtrack on repayment of a loan when they have already invested a large part of their own money.

As you will have understood, the greater the personal contribution, the more the bank is inclined to grant credit.

 

Using the services of a broker: good idea or not?

mortgage loan

Even when you have all the assets in hand, banks may be reluctant to offer the best credit terms.

In these cases, it may be worthwhile to use the services of a mortgage broker. His job will then be to help you fine-tune your credit report, and to contact the various banks.

Thanks to his knowledge of the market and his close relationships with the various market players, the mortgage broker will be able to show you the best leads.

It is true that his remuneration will be added to the various costs associated with the mortgage, but at least you will be guaranteed to find the best credit conditions. It is well known however, a difference of one or two points on the credit interest rate is worth thousands of dollars!

The consequences of the financial crisis on the credit market

The financial crisis erupted in Europe in the course of 2010. It took on worrying proportions in 2011 and is now threatening to implode the European economic area. The origin of the financial crisis has its roots in the worrying development of public deficits and especially in the will of European governments to stem this alarming development.

 

The first observations

Fourteen EU member states posted public debt above 60% of GDP in 2010. These are Greece (124.9%), Italy (118.2%), Belgium (99%), Portugal (85.8%), France (83.6%), the United Kingdom (79%), Hungary (78.9%), Germany (78.8%), Ireland (77.3%), Malta (71.5%), Austria (70.2%), the Netherlands (66.3%), Spain (64.9%) and Cyprus ( 62, 3%).

This observation has led to a first consequence: international rating agencies are starting to take an interest in the ability of member states to honor their sovereign obligations. Thus, France and Belgium have recently lost their famous triple A and the long-term prospects are mostly negative for many member countries. This means that interest rates for member states could rise and increase the burden on states to finance themselves on the market and make it more difficult to finance the deficit between national revenue and expenditure.

 

Whose responsibility is it?

The banks’ responsibility in this development is important. In fact, many renowned banking establishments have purchased sovereign debt from highly indebted states. These institutions have speculated on the high interest rates offered by these countries while minimizing the risk of bankruptcy. However, it turns out that some countries may not be able to meet their obligations (like Greece) and cause their creditors, that is to say the lending banks, to fall.

The reaction of the governments of the member states has been of three kinds: refinancing of banks on the verge of bankruptcy. This refinancing was coupled with an almost majority stake of the States in the supervised banks (nationalization) and of course, therefore, increased control by the States of banking activities. These necessary interventions unfortunately have harmful effects on the real economy and in particular a redefinition of credit policies.

 

The impact on credit

From the first quarter of 2012, the negative effects on economic activity are obvious: a reduction in mortgage loans in France by 47%, a decrease in European car sales by almost 27% and in Belgium an increase in the number of bankruptcies of 26% . In this area, it turns out that some companies that go bankrupt yet have well filled order books but no longer know how to access the credit market because banks are now practicing strict and prudent policies.

In this situation, independent credit brokers, such as Lite Lending, may well have a fundamental role to play in the continuity of the real economy. Indeed, Lite Lending works with banks specializing in credit. Some of these banks do not offer traditional services (bank branch, savings account, current account). They are specialized only in the granting of credit and not receiving savings, they do not speculate either. In other words, the financial crisis has hardly changed their approach to credit.

Tax deductions from a mortgage loan

You have recently taken out an installment loan or a mortgage loan and are asking yourself the relevant question of tax deductions or advantages to which you can claim.

In Belgium, given the importance of the tax burden, taking an interest in taxation and tax advantages that could reduce your overall taxable income is an essential question.

Firstly, the fundamental distinction should be made between credits contracted for private purposes and those which, on the contrary, were contracted for professional purposes.

 

Professional credits

Professional credits

In Belgian tax law, an expenditure cannot be considered by the administration as being deductible on the sole condition that its purpose is to facilitate the collection of professional income. Thus, the car bought by the doctor to visit his patients will only be deductible because it allows him to earn income from his professional activity. On the contrary, certain mixed expenses, that is to say, which serves both professional and private life, are only partially deductible.

Thus, a loan which is intended to be essential for the collection of taxable professional income will be 100% deductible, interest included. Deductibility is generally broken down through an annual depreciation percentage. For example, a car is depreciable in five years at most. This method aims to allocate costs over different fiscal years to distribute the tax effort over several years.

 

The deductibility of your mortgage credit

The deductibility of your mortgage credit

In the sphere of expenses useful for your private life, the only credit that is deductible or that provides tax advantages is the credit that is used to acquire your first home: your mortgage credit therefore.

In short, the tax deduction is carried out as follows: you can deduct the principal repaid as well as the interest and insurance premiums but the total of these amounts is capped at the maximum annual of $ 2,120 per person subscribing to the mortgage loan. For the first ten years, this amount is increased by $ 710 for a total of $ 2,830 per person. If you have at least three children you can add an amount of 70 $.

These increases are only valid for the first ten years and are only valid if you own one home.

Conditions to be able to deduct your mortgage from your taxes:

  • The loan must report to a single house and intended to be the main accommodation of the family;
  • The loan must be secured with a mortgage;
  • The duration of the loan must be at least ten 10 years;
  • The loan must be taken out with a credit company established in the EEA (European Economic Area)

Refusal of housing loans: what solutions?

A person wishing to obtain a mortgage must prove to the banking establishment that he is creditworthy. Many banks ask for a mortgage or a guarantee of Good Finance. However, its granting is not automatic. How to do, in case of refusal?

Why can a Housing Credit not be granted?

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Good Finance is not to be associated with borrower insurance. This covers you if, during the repayment of the mortgage, you encounter payment difficulties due to an accident or illness, for example.

Good Finance is highly appreciated by banking establishments which see in it a guarantee of being reimbursed, if the borrower is no longer solvent, for a given period. This is why, when the bank has hesitation about the repayment capacity of a potential buyer, it does not hesitate to send them the loan request file, for study.

An unstable professional situation may be the reason for the refusal of Good Finance. It is indeed necessary to prove that the income is fixed, to guarantee reimbursement. The presence of too many credits to be reimbursed can also explain this negative response. Finally, the fact of not having contributed, when applying for the loan, does not work in favor of the applicant.

What solution to obtain your mortgage, in case of refusal by Good Finance?

cash

Fortunately, there are solutions to get a positive response from the bank. At first, you can set up a mortgage. Of course, it is necessary to present an asset whose value will correspond to that of the loan requested.

This solution is to be considered, but know that you will have to postpone your purchase by at least a month; time required to set up this mortgage. If you do not have real estate that can serve you, for this solution, you can turn to another bank.

You just got a bank refusal. But all banking establishments are different. Of course, the financial aspect will always remain a major criterion. But sometimes bankers are less reluctant than others to lend money if they think your file is acceptable.

In this sense, you can turn to online comparators, but you can also get help from a broker.

What is the role of a broker?

money

A broker is a financial intermediary between individuals and banking establishments. You can contact him and tell him about your problem. It will, first of all, establish the feasibility of this request for credit, with regard to the state of your finances.

If he thinks that the file can pass, he will make an exhaustive comparison of the banks. With an extensive relationship, he knows which bank practices this rate and which other gives more easily a mortgage on a longer-term.

Knowing this, he will be able to direct you to a bank that will listen to you and take the time to examine your request, with fresh eyes and without preconceptions. With, perhaps, the key, a mortgage, to finally be a homeowner.

Can you take out a mortgage without having finished paying off your consumer loan?

It may happen that one needs to take out real estate, to become an owner. However, is this possible since you still have to repay your consumer credit? We tell you everything.

 

A question of timing

consumer loan

You should not forget that one is a medium term loan and the other will commit you to years of repayment. Taking out a mortgage should not be a problem, since the consumer loan will be reimbursed quickly enough, you will only have the mortgage to repay.

However, it is not always easy to keep track of finances when you have to repay two different credits, on different dates in the month.

 

Is it possible to combine consumer credit and mortgage loan?

mortgage loan?

In principle, nothing prevents you from taking out a mortgage, even if you have not yet finished paying off your consumer credit.

The only parameter on which the banks rely on whether or not to grant you additional credit is your debt ratio.

If your outstanding loans already reach or exceed 33% of your income, it is practically impossible to find a bank to finance your mortgage.

Not only will your over-indebtedness greatly affect your purchasing power, but it will also affect your ability to repay.

 

Can we “drag” consumer credit into mortgage?

Can we "drag" consumer credit into mortgage?

Many people wonder if it is possible to include a consumer loan in a mortgage. The reimbursement will then be made under the conditions of the mortgage.

However, the problem arises at the level of the loan contract. This must be based on the foundations of a consumer credit or a mortgage, and not both. This is the reason why banks are very rare to accept this type of arrangement.

 

Credit consolidation, a possible option

Credit consolidation, a possible option

If you want to have consumer credit and mortgage in one single contract, you can take out both and later consolidate credit.

This operation consists of redeeming all your current credits and redefining the terms of a new contract. The repayment term will then be extended, the final cost of the credit will be increased, but the monthly payments will be reduced so as not to penalize your purchasing power.