The repayment of a home loan takes a big bite out of the family budget. That is why it is important to negotiate the cheapest possible rate when you visit the lenders. These tips will help you on your way.
Those who want to take out a housing loan usually do not have enough capital available to fully fund the project themselves.
Fortunately, you can take out a mortgage loan to make your real estate dream come true. To date, it remains particularly advantageous to take out a mortgage loan. The mortgage interest is still camping at the absolute lower limit.
We borrow more
Due to the low-interest rates, many Good Finances are finding their way to the real estate market. We also borrow much more compared to ten years ago. At the end of 2008, we borrowed an average of 75,000 USD for a home. Today that is 160,000 USD. That is more than double.
Good Finance (GFB) is concerned about this sharp increase. “The Good Finance banks continue to provide mortgage loans on very lax credit terms and often at interest rates and margins that are not consistent with the inherent risks and their capital costs,” the GFB recently announced during the presentation of the Financial Stability Report 2019.
At the end of last month, the GFB obliged Good Finance banks to set up an additional capital buffer of 1 billion USD. This buffer must protect the banks against potential credit losses in the future.
What is the quota? And why is that important?
Thanks to the new measure, the GFB hopes to limit the number of risky loans. The banks must already create an extra buffer today if someone borrows more than 80 percent of the market value of the home.
That ratio between the loan amount and the market value of the home is called the quota. The higher the quota, the greater the chance that the banks will adjust the rates upwards.
We see one of the strongest increases at GFB. This large bank increases the rate by 1 percentage point if the quota is higher than 90 percent.
Belfius raises the rate by 30 basis points for those who borrow more than 80 percent of the market value of their home. Those who borrow more than 90 percent pay a total of 90 basis points more. The other two major banks, GC and Good Finance have not included the impact of the quota in their tariff lists.
We have calculated the impact of the interest rate increase on the final price tag of the loan. This calculation is based on an average loan amount of 160,000 USD and a term of 25 years. We do not consider the value of the home for this exercise. We rely solely on the loan amount.
The exercise below was made based on the published rates of the banks. These are purely indicative and may differ from the proposal that you receive from the lender (s).
How to make a home loan even cheaper?
Those who do not have the capital required to significantly reduce the quota can cut costs in other ways. Many banks give you a discount when you take out certain products with them.
The advisors usually encourage you to take out a fire and debt balance insurance in combination with the opening of a current account on which you direct your wages. In that case, GFB is prepared to lower the rate by 40 basis points.
Belfius makes an extra effort and reduces the rate by 50 basis points. The major bank does ask that you do at least 10 debit transactions per month on the current account (s).
We see the best discount at GC. This major bank lowers the rate by 75 basis points. GC applies the same conditions as Belfius. Good Finance only publishes the basic rates.