When you are planning to build or buy an apartment or a detached house, you have the choice between many financing methods:
- Personal contribution.
- The bank loan.
- The zero rate loan (also called PTZ +)
- The 1% employer loan.
- The home savings loan.
- The loan relay.
The loan agreement,
1) Where to get information and / or take out a loan agreement?
The easiest way is to contact your bank, it is very likely that it has signed an agreement with the Cream bank. If this is not the case, please contact another bank or a financial institution. But this is unlikely, given that most of the major French banks have signed this agreement.
- Your bank advisor can therefore include the loan under agreement in your financing plan at your request.
- Be aware that the loan under agreement can in some cases cover all of your financing!
2) What can we finance with an approved loan?
- Your main residence (apartment or house).
- It can finance the construction, or the purchase of new or old housing or even a renovation of old or an enlargement.
3) Who sets the rate of the loan agreement?
The state sets the rate, but be aware that banks have a margin and therefore you can negotiate the rate (the negotiation margin is low, but it’s worth a try).
4) Are there any constraints?
Yes, if you finance all or part of your accommodation with an approved loan, you will of course sign a contract, which includes fairly restrictive clauses:
- This accommodation cannot be your second home, nor become it until the loan is fully repaid.
- It can be rented as a seasonal rental, but beware the duration of the rental cannot exceed 4 months in the year.
- You cannot transform your accommodation into commercial premises. (Unless you have fully repaid the loan).
- From the end of the work (if you are building), or from the date of purchase, you have six months to move in. (except exceptions such as: A return from DOM-TOM, or a good intended to be lived in the retirement. (The deadline can then be increased to 6 years).
5) Duration of the loan:
The approved loan can be repaid over a period ranging from 5 to 35 years.
- Obtaining a loan under agreement can give the right to obtain Personalized Housing Assistance (APL).
- Contrary to what is commonly heard, the approved loan is not linked to a resource ceiling.
- As we said plus rate, the rate is set by the state. It therefore does not evolve according to the financial markets (As do banks and financial organizations which very often revise their rates according to the interest rates from which they themselves borrow).
- Since rates are currently historically low (between 3 and 4% * ), the loan under agreement is not competitive (between 4.75 and 5.20% * ).
- (*) The rates we indicate are those in force at the time of writing this article (1st quarter 2014).
Our Notice :
- Make your calculations but it seems to us that at the moment the rates of the approved loan are not attractive. But the best is to discuss it with your banker, and to calculate if the fact of collecting the APL can compensate for a repayment of loan whose rate is higher?
Small Simulation :
As an indication and so that you can make up your own mind, we have made a small calculation for you.
Namely: For a sum of 100,000 USD borrowed and repayable over 20 years, the amount of the monthly repayment periods according to the interest rate is as follows:
- If the interest rate is 3% : The monthly maturity is: 554.60 USD.
- If the interest rate is 4% : The monthly maturity is: 606.00 USD.
- If the interest rate is 5 % : The monthly maturity is: 660.00 USD.
These figures speak for themselves! A difference of 1 point has a huge impact on the amount of the monthly reimbursement! (More than 100 USD per month for 2% difference).
We can therefore only advise you to make the competition work, and to negotiate firmly with your banker!