8 good reflexes to get your mortgage

The property market has been experiencing an unprecedented situation since 2022, resulting from the combination of multiple factors: notably rising interest rates, the usury rate limiting lending possibilities, and the downward trend in property prices which appears to be confirming itself, especially in major cities.

For buyers, becoming aware of these developments and adapting their buying strategy – and borrowing strategy – is essential to the full success of their property projects. In particular, they need to ensure that the APR (annual percentage rate of charge expressing the total cost of the loan, interest and all other expenses included such as insurance and arrangement fees) to which their mortgage offer will be subject, will be low enough to remain below the usury threshold. The usury rate is indeed the maximum interest rate at which banks are authorised to lend money, which is set and reviewed quarterly by the Banque de France.

Obtaining the lowest possible APR is not only a way to save money, but is also essential to the feasibility of the property project. Here are our 8 tips to ensure the best result.

#1 Negotiate the price of the target property

First and as we have mentioned, property prices appear to be entering a potentially lasting decline. Keep in mind that the vendor of the selected property will not be at ease, unless they have already adjusted their asking price to the market conditions. In most cases, they will have set the same price at which the property would have sold quickly a year ago, and a negotiating margin will be available to you, which you must not miss.

Reducing the acquisition price has several very important consequences for your mortgage application:

• a smaller amount to borrow and therefore an increase in your deposit contribution to the total loan amount;
• the possibility of reducing the loan term or, failing that, reducing the monthly payment to optimise your debt-to-income ratio;
• overall, this gives a chance to obtain a better rate from banks by improving all your loan variables.

If you are aware that your application might be borderline for obtaining a mortgage, the first thing to do is to try to acquire the property as cheaply as possible.

#2 Prepare your file carefully

It cannot be said enough: putting together a complete and clear application from the outset is a considerable advantage in obtaining a mortgage. While it may be a matter of making a good impression on the bank advisor and their management, it mainly allows you to save time.

Shortening the timelines is important: after signing the preliminary contract, you generally have 2 to 3 months to present your mortgage offer accepted by a bank, failing which the property could be sold to someone else. Also, remember that the usury rate is reviewed quarterly and there is no guarantee that the next review will be favourable to you. Put together your application with the current parameters in mind, and try to finalise the mortgage request before any change in market conditions.

#3 Use the services of a mortgage broker

If this is not your first property venture, you will certainly have noticed: not all banks apply the same policy and, in particular, do not wish to attract the same client and borrower profiles. That’s fortunate! Without this, some buyers would probably find themselves left out, simply because their application does not match the bank’s general policy.

As a result, however, it is necessary after signing a preliminary contract, to look for a bank that is interested in our profile, and that also accepts granting the best borrowing conditions. A headache synonymous with numerous appointments, putting together applications, in short a significant loss of time. Unless you use a mortgage broker.

This professional is aware of the various banks’ policies, which as we should not forget, are subject to change: the bank that granted you a loan 10 years ago under good conditions may not do so this time. The broker communicates permanently with all banking establishments and can, from your first interview, inform you which banks are most likely to respond favourably – and appropriately – to your request. More importantly, thanks to the volume of business they bring, the broker is able to negotiate low rates with banks, simply unattainable for a private individual acting alone.

Furthermore, putting together a single application is sufficient, and your broker will present it themselves without you having to travel. Your only step will be to visit the appropriate bank branch to sign the loan offer.

#4 Negotiate the nominal mortgage rate

With the continuous decline in mortgage interest rates over recent decades, some banks no longer go to any lengths to attract customers for this type of service: they would prefer today to conclude fewer loans, but on more advantageous terms for themselves. Therefore, putting several banking establishments in competition is essential to find the most interesting nominal rate possible.

Regarding your application, find the balance between your debt-to-income ratio and the loan term requested: reducing the loan term automatically decreases the rate offered by banks. Borrowing over a longer term than what is possible generally costs more, and risks your application hitting the legal usury rate barrier.

#5 Reduce the cost of borrower insurance

Since the Lagorde Law of 2010, any property borrower can freely choose the insurance that will cover their loan, via the insurance delegation mechanism. The cost of borrower insurance can weigh heavily in the APR, so it is entirely advisable to put the competition into play again, to find an offer that facilitates the loan passing under the usury rate.

If the latter is not a problem, note that some banks may implicitly condition their agreement on taking out insurance with their services. In this case, know that you will be free from the start of loan repayment, to negotiate cheaper insurance and free yourself from the bank’s. On these matters, your broker will be invaluable.

#6 Consider a nested loan

This solution can allow you to reduce the overall cost of your property credit, and to play on the interest rates applied through a credit taken out on two lines rather than one. The nested loan, or duo, is then a loan artificially split into two parts: a shorter credit, with a competitive interest rate, supplementing a longer classic credit and logically of a lesser amount. The arrangement however results in the repayment of a single monthly payment, after smoothing the monthly payments of the two loans.

This allows you to optimise the borrowing cost and manage repayments according to your possibilities: if income or an increase in means is expected soon, or if another loan is ending soon, the nested loan can allow you to carry out your projects without waiting. And of course, it can allow you to obtain a property mortgage despite a borderline application under the classic form.

#7 Use a capped loan

This is a variable rate loan, a formula normally inadvisable as it carries uncertainty, with the exception that the capped loan offers the possibility of limiting the rate variation, both upwards and downwards. You could, for example, sign a property loan with a base rate of 2%, which could therefore vary over the years of repayment, by +1% or -1%. The “Euribor” (Euro Interbank Offered Rate) index serves as reference, for variations that will moreover impact the total cost of the credit.

The monthly payment to repay is therefore likely to vary and your budget must be able to adapt if the evolution is costly. In return, the variable rate at the start of the loan is lower than that of a fixed-rate loan, which can facilitate the completion of the property acquisition. If the capped rate is not limited downwards, it may also be possible to benefit from nice savings if conditions become favourable. And in the opposite case, it remains possible to negotiate a switch to a fixed rate.

#8 Set up an SCI, as a last resort

To conclude, note that as a legal entity, the SCI is not protected from excessive credit costs like private individuals: the usury rate does not constitute a barrier. If the property acquisition proves impossible with a classic loan, you can consider setting up an SCI which, while incurring costs relating to its creation, can facilitate the transfer of property assets to your family, arrange ownership between spouses and protect a surviving spouse, etc.

Regarding property credit, each partner of the SCI must justify the resources necessary to repay their share. However, an option can make them jointly liable, each of them becoming guarantor for the others, which facilitates acceptance of the application by the bank.

Obtaining a mortgage in 2023 is not something to be improvised: good preparation and certain key steps are essential to stand out in a market swamped by a crowd of borrowers limited the previous year by a usury rate that was too low. Follow our advice to maximise your chances of carrying out the best possible transaction, and make your dream project a reality!

Examples of mortgage brokers

Artémis courtage

Artémis courtage is a mortgage and borrower insurance broker, searching for tailored solutions. Artémis courtage works with you on your financing file from A to Z to successfully complete your property project. A property purchase is the project of a lifetime, which is why the 500 financial advisors at Artémis courtage put their expertise at your disposal. Visit one of their 100 agencies to discuss your situation and upcoming property project. www.artemiscourtage.com

Meilleurtaux

Are you looking for the best rate? Since 1999, Meilleurtaux™ is an expert broker in mortgage loans, debt consolidation, borrower insurance and consumer credit. www.meilleurtaux.com