Borrowing to buy real estate is a necessity for the vast majority of households. Among the determining criteria in the constitution and validation of a loan file is the personal contribution. The higher it is, the lower the mortgage rates will be.
Real estate credit: what about personal contribution?
The personal contribution is a sum of money which a future borrower has in anticipation of a real estate investment, whether for example a purchase of housing or renovations to be undertaken. This savings can be the result of savings obtained over the long term.
It can also be the result of a family donation, an inheritance or even a capital gain made in the context of a previous real estate transaction. Borrowing without personal contribution remains possible, but it is often advisable to have at least 10% of the amount of the property purchase, so as to be able to finance the notary fees.
Influence on the allocation of a home loan
In theory, personal contribution is not compulsory to take out a mortgage. Except that in practice, it plays an essential role. Most banks and mortgage brokers are increasingly recommending it to investigate and validate their clients’ files. In 2016, more than 2 out of 5 financings even included a contribution of at least 15% of the value of the property, according to figures from the Supervisory Authority . Beyond this “sounding and stumbling” aspect, the personal contribution makes it possible to give the broker or the bank adviser guarantees on your investor profile, as well as solid guarantees on your ability to repay the mortgage .
Personal contribution: an automatic impact on rates
Observers of the banking and real estate sectors are formal: the more this personal contribution is important compared to the financing requested, the more the borrower is in a position of strength to negotiate a mortgage and to compete with the lenders . Therefore, depending on the volume of his personal contribution, the subscriber can benefit from attractive mortgage rates . All this, regardless of the upward or downward situation on the interest rate market.