Mortgage: how to avoid the bank's traps?

The slight increase in interest rates that began in 2016 has now come to an end and rates are currently at an attractive level. This context which is affordable and accessible for borrowers nevertheless harms the banks, as they have seen their profit margins shrink. Bankers have therefore found another way to make up for their lost earnings by nibbling away at a range of commissions. We present in this article the tricks to identify them and learn how to avoid these traps.

Elements of the mortgage to examine closely

Several details will accompany your mortgage. These include file fees, insurance, guarantee and income domiciliation requirements. Your bankers will be intransigent on all of these points and you will need to pay attention, because behind an attractive rate other significant real costs of credit may be hiding.

Income domiciliation

It should be noted that banks derive considerable profits from salary or income domiciliation, as this is where they charge card fees, account management fees and other commissions of all kinds. Previously, borrowers were required to domiciliate their salary with the bank where they wished to take out a mortgage, but things are different with the Macron Law: they are now free to choose the bank where they wish to domiciliate their income.

Despite this freedom of choice, a clause in this law allows the bank to formalise in writing a domiciliation of income for ten years! In return, banks must grant you an advantage to also formalise the loan contract. This advantage may take the form of a discount on file fees or on the rate. You should therefore read between the lines carefully and compare between banks so as not to lose this small advantage.

Guarantee or mortgage requirement

A guarantee or mortgage request is inevitable for loan applicants, and yet it can prove to be a trap in case of a poor choice. It is not by chance that around 60% of loans rely on bank guarantees. Indeed, guarantee works out cheaper than mortgage and it is even a less burdensome choice for the bank. Some banks do not hesitate to overcharge by 0.20 to 0.40% on credit rates in the mortgage option.

By way of example, a loan of 200,000 euros over twenty years will require a guarantee of 1,099 euros, whereas in the case of a mortgage, the amount will rise to 3,950 euros. It should be noted, however, that one does not always necessarily have a choice of institution, as certain banks will impose their subsidiaries on you.

Time for negotiation

Even though it is certain that you will not obtain free file fees, there is always room for negotiation and opportunities to make savings with your banker. You can, among other things, negotiate a large discount on file fees in exchange for salary domiciliation, or take out borrower insurance that can be easily cancelled after one year.