A real estate purchase insight, but no personal contribution to present to the bank? We will see in this article that depending on the situation, it is quite possible to borrow without contribution. Good Credit, a leading specialist in personal loans that can be amortized between individuals, takes stock of the question of mortgage loans without contributions.
Personal contribution: what exactly?
The personal contribution corresponds to the amount you can pay to finance part of your property purchase. This amount supplements that of the mortgage. The existence of a contribution is always a plus: it reassures the bank as to the borrower’s ability to save, and therefore, its ability to repay its loan.
In general, the bank requires that the personal contribution represents at least 10% of the amount of the property. Why? Quite simply so that the borrower can cover the costs attached to the real estate’s purchase, such as notary fees, agency fees, and application fees.
Indeed, very often, the banks impose on the borrower to advance all these costs. However, after studying his situation, it remains possible for the borrower to obtain a mortgage without contribution, that is to say, equivalent to 110% of his property purchase.
How to get a mortgage without contribution?
First, the bank will want to know the reasons why the borrower has not contributed. This can, for example, be due to the fact that he has just entered working life (so he has not yet had time to save) or that he recently faced a personal event (illness, divorce, etc.). ).
In any case, faced with a borrower who has no personal contribution, the bank will analyze his situation as a whole. As for a borrower with a contribution, it will focus in particular on:
- Its debt ratio (ratio between expenses and income);
- The amount of his income;
- His professional situation and possible development possibilities;
- Its ability to manage its bank account (existence or not of overdrafts);
- Its savings capacity.
The borrower may indeed have a financial investment such as life insurance, but not want to use it for his real estate purchase. The more favorable this data is, the more the borrower will have the chance of seeing his home loan without a loan accepted.
A personal loan to finance additional costs, a good solution?
If the personal loan does not make it possible to finance a property purchase, it makes it possible to carry out certain additional operations. This includes, among other things, the costs associated with this purchase. However, multiplying credits is not the best strategy
By taking out a home loan alone, you will benefit from more advantageous borrowing conditions. It is also important to note that a personal loan cannot generally exceed a term of 7 years. A short repayment period, compared to the amount that can represent a real estate purchase.
For example, if the purchase price of your property is $ 220,000, you will have to reimburse an amount of approximately $ 260 / month for the costs, in addition to your mortgage, at least in the best case. Depending on your situation, you may have to repay your personal loan over a shorter period. This would inevitably imply higher monthly payments.
If the bank is reluctant to grant you a mortgage without contribution despite a good record and a stable situation, or if the proposed borrowing rate is too high, it is better to contact other organizations specialized in mortgage credit to play the competition. Good Credit advises you to use online mortgage simulators and comparators.