For a real estate loan, the guarantee is a legal protection measure put in place by the financial institutions in order to mitigate the possible risks of cessation of regularization of the monthly payments. This security asset of the lender ensures the recovery of the granted funds, whatever the parameter was handicapping the repayment of the borrower.
Given the size of the issue, the guarantee fees for a real estate loan are quite expensive. They represent about 2% of the loan. Some tips are to be taken into account to pay the minimum guarantee fees. So, without further ado, let’s dive into this blog and learn more about mortgages.
1. Favor the guarantee system
For a real estate loan, several forms of guarantee are proposed. By definition, the first form of guarantee authorizes the lending institution to put the mortgaged property up for sale as soon as the borrower’s default in repayment is taken into account. In short, there is the mortgage and the surety system.
In practice, this system is unfair if you only have a few monthly payments left to make. Indeed, the risk of losing the mortgaged property is the same regardless of the debt repayment progress. Moreover, this alternative gives rise to rather heavy administrative parameters, thus generating additional costs.
Given this fact, it is preferable to opt for the bonding system. The way it works is as follows: the specialized financial organization will ensure the repayment of the debt to the lender in case of financial incapacity of the borrower. This technique is financially fairer. Indeed, contrary to the mortgage, it does not involve any major risk for the borrower’s assets and allows him to pay only the amount due.
2. Use a real estate loan simulator
Any request for a real estate loan includes a guarantee clause. The latter varies according to the financial institution in question, the amount of the loan requested, and the borrower’s debt capacity. Before implementing the administrative and banking steps, the borrower must have the maximum information concerning his project. Indeed, it is necessary to choose the financial establishment proposing rates of guarantee at lower costs.
The real estate project’s conception phase necessarily passes by using a simulator of real loans. Its main advantage is that it offers the possibility of comparing and exploiting the guarantee companies’ competitive strategies. Here, the objective is to pay the strict minimum of charges attached to the loan.
This way, one can study the different proposals and pricing options available in the market. Thus, this application contributes to the choice of the specialized financial institution offering the least expensive guarantee fees. Furthermore, it is important to know that the mortgage simulator offers the possibility to increase or decrease the amount of the loan requested.
3. Use the services of a real estate broker
A real estate broker is a professional of the real estate world, working on behalf of a private individual wishing to proceed with the purchase, the sale of real estate, or the repayment of a real estate loan. As such, he takes care of all the administrative procedures related to his client’s goal. In this case, he intervenes in the design phase of the real estate loan application, the assembly of the administrative files, and the possible related negotiations.
The most interesting thing is that he has the technical and strategic capacity to look after his client’s interests by studying the financial institutions offering the lowest interest rates and the specialized companies with the most advantageous guarantee conditions. Contrary to popular belief, hiring a real estate broker is far less expensive than inappropriately choosing a lending institution with very high collateral costs. It is an appropriate solution for anyone wishing to pay a guarantee fee at a lower cost.
How to find the best rate for your home loan?
Aspiring homeowners are always asking themselves what to do to find the best rate for their home loan? Here are some tips that may help you do just that.
Compare banks
When choosing between two banks, pay attention to the annual percentage rate of charge (APR). It includes all the costs related to the real estate loan. It is about :
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- The deposit
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- The insurance of the real estate credit
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- The expenses of banks
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- The interests.
You must therefore be careful to compare what is comparable to get the best rate for your real estate loan (source).
Increase your score
The scoring is an evaluation tool set up by credit institutions to minimize risks. This tool makes it possible to estimate your reliability and creditworthiness for the loan. The criteria taken into account by the scoring are:
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- Age
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- Housing
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- The profession
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- Housing situation
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- Marital status
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- The number of dependent children.
These criteria allow credit institutions to have basic information about you. However, they do not allow them to determine your living standard or ability to repay the loan. For this, they ask you to attach to the loan application file:
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- Your last three pay slips
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- Your bank statement
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- Your previous two tax notices
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- Your additional income.
These establishments like the profiles of employees in permanent employment and liberal professions. It is obviously challenging to decide on your age, the number of children, or professional status. However, to increase your score, you can act on:
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- The reliability of your real estate project
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- Your borrower profile
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- The borrower’s insurance
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- The keeping of your accounts.
This will allow you to find the best rates for your real estate loan.
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