The repayment of a home loan weighs heavily on the family budget. That’s why it’s important to negotiate the cheapest rate when you visit the lenders. Here are some tips to help you on your journey.
Anyone wishing to take out a housing loan usually doesn’t have enough capital to cover the total cost of the project itself. Fortunately, you can take out a mortgage to complete your real estate project. To date, it is still very advantageous to take out a mortgage. The mortgage interest rate is always at the absolute minimum level.
We borrow more
Because of low interest rates, many Belgians are turning to the real estate market. We also borrow a lot more than ten years ago. By the end of 2008, we borrowed about 75,000 euros for housing. Today, it’s 160,000 euros. It’s more than double.
This sharp increase is a source of concern for the National Bank of Belgium (NBB). “Belgian banks continue to grant mortgages on very lax credit terms and often at interest rates and margins that do not match the inherent risks and their cost of capital,” the BNB recently announced. the presentation of the Financial Stability Report 2019.
What is the quota? And why is it important?
Banks must already create an extra handwheel when someone borrows more than 80% of the market value of the house. The ratio of the loan amount to the market value of the house is called the quota. The higher the quota, the more likely it is that banks will adjust rates up.
This big bank increases the rate by 1 percentage point if the quota is higher than 90%. Belfius increases the rate by 30 basis points for those who borrow more than 80% of the market value of their home. If you borrow more than 90%, you pay a further 90 basis points.
We calculated the impact of the increase in the interest rate on the final price of the loan. This calculation is based on an average loan amount of 160,000 euros and duration of 25 years. The value of the house is not taken into account for this exercise. We rely exclusively on the loan amount.
The following exercise was performed on the basis of the published rates of the banks. These are purely indicative and may differ from the proposal you receive from the lenders.
How to make a home loan even cheaper?
If you do not have the capital to significantly reduce the quota, you can reduce costs in another way. Many banks give you a discount when you buy certain products from them. Advisors generally encourage you to purchase fire insurance and outstanding balance insurance in combination with opening a current account on which you repay your loan.
Belfius will make an extra effort and reduce the rate by 50 basis points. However, the large bank requires you to perform at least 10 debit transactions on the current account (s) each month.
Additional tips to save on your home loan
- Compare mortgages on our site.
- Compare as many banks as possible. Lenders are more inclined to lower the rate if you get better conditions elsewhere.
- Redeem a portion of your mortgage against a mortgage mandate. A mortgage is a guarantee (usually the house you buy) that you give to the bank. If you do not meet your financial obligations, the lender can sell your house to pay off your debt. In the case of a mortgage mandate, the lender does not immediately enter a mortgage on your home. You give permission to do so later if necessary. If you repay your loan correctly, the lender will never convert the money into a mortgage. You must pay less notary fees for a mortgage mandate. Caution: A mortgage mandate does not entitle you to a tax benefit. This is why lenders usually offer to combine mortgage with a mortgage mandate. In this case, you keep your tax benefit while saving on notary fees.
- Think of a variable interest rate. A variable interest rate can double as much as possible. If, after doubling, the rate approaches the fixed rate, it is certainly worth considering the variable rate.
- Pay the premium of the balance insurance at one time. Many banks will then give you a discount on this premium.