Loan: calculation of rights, interest rate and reimbursement

With falling interest rates, home loans from the home savings plan have lost their appeal. Definitely? Not sure. Certain situations can encourage the borrower to include the Good Credit loan in his financing plan and even to open a new operation and acquire the rights to finance his future projects or those of his children. http://drzuhair.com/123-payday-loans/ has more details

Clarification with our experts. Conditions for opening rights Maximum amount Combination of several plans Transfer of rights Interest rate Integrate a Good Credit loan into your financing plan Keep your home savings plan

A loan subject to conditions

Rights open

The rights to a mortgage are open when 2 conditions are met:

  1. He has been detained for at least 48 months.
  2. He has reached a minimum of interest.

Note that the rights arising from transactions subscribed after March 1, 2011, remain open 5 years after the plan ends.
Important: in case of withdrawal of funds, the loan must be requested within a maximum of one year. 

Fundable operations

Plans opened after March 1, 2011

The LAGARDE reform of 2011 limited the use of housing savings loans to the single main residence. Loans from plans opened after this date can only be used for one of the following:

  • Building land provided that construction takes place simultaneously with the acquisition of the land.
  • Old or new housing.
  • Parking space (box, garage or parking lot) located near the main residence.
  • Some improvements, expansion, energy savings … Note that the improvement of work or home maintenance is not fundable.
  • SCPI units provided that the funds are invested in residential property.

Important: the circular of July 11, 1986, authorizing the financing of works related to the principal residence of the ascendants and descendants or of the tenant of the borrower is still in force.

Plans opened before March 1, 2011

The rights can finance the purchase of a second home, a tourist home, as well as the carrying out of a certain renovation, works linked to the second home.
Please note that goods for commercial use are not eligible.
Note: the occasional rental of the second home does not affect the benefit of the loan.

Maximum loan amount

Maximum loan amount

The amount of Good Credit loan rights depends both on the interest accrued excluding the state premium and on the repayment period chosen by the borrower.

But make no mistake: to benefit from an attractive amount, you must have accumulated a lot of interest and borrow for a short period.
The loan entitlement is calculated in two stages.

Determination of the amount of repayment interest

First, a multiplier is applied to the cumulative interest accrued on the plan.

  • 2.5 for the acquisition of housing or the carrying out of eligible work.
  • 1.5 for the purchase of SCPI units.

For example, if your plan earned you $ 1,500, the reimbursement interest will be:
[2,5 * 1,500 = $ 3,000]

Calculation of loan amount

The result then allows for a repayment period of between 2 and 15 years to determine the amount of the loan in a range of 5,000 to 92,000 $. You will understand, the shorter the duration, the higher the loan amount.
Namely: the home savings loan can finance the entire acquisition or be used in addition to the main loan.

Multiple Good Credit loans

Multiple Good Credit loans

It is possible to cumulate the rights obtained on different home savings plans within the limit of the ceiling of $ 92,000. A couple, each with one operation, can thus combine the rights of the 2 operations. It is also possible to combine the rights obtained on a Good Credit.
For loans opened on or after March 1, 2011, only one loan combining the various rights is granted. A single rate is then calculated by weighting the rate for each of the plans. The monthly payment obtained is identical to that given for two or more separate loans.
Namely: when the plans have been taken out with 2 separate banks, the Good Credit loan must be granted by the one where the amount of interest acquired is the highest.

Transfer of rights

Good Credit loan rights subscribed by ascendants, descendants, brothers or sisters, uncles or aunts, nephews or nieces can be transferred on the double condition:

  1. That the plans have been held for more than 3 years.
  2. That the borrower himself has a Good Credit entitling him to loan.

Note that the assignment is made outside of donation since only the right to the loan is transferred. Important: the rights obtained by the family of cohabiting couples or couples in a civil partnership cannot be transferred.

Should the Good Credit be integrated into its financing plan?

Should the Good Credit be integrated into its financing plan?

Several years ago, a real estate project was only considered after the opening of a housing savings plan or account.
The fall in the rate of return on savings – and therefore in the amount of the right to lend – combined with the fall in the rates of mortgage loans now limit their use.

The choice to integrate the amount of a Good Credit loan into your financing plan theoretically depends on the rate of the loan, and therefore on the date on which the plan was taken out. Except that in practice, no plan allows today to benefit from a lower rate than those currently practiced by banks.

Loan types either credit or direct debit

The classic – the current account for everyday use

The classic - the current account for everyday use

The checking account, or, as it is often called in abbreviation, the account, is practically inevitable. Since cashless payment transactions have displaced the wage bag, a checking account is required for the everyday things in life. Payment transactions are made via a current account. This means transfers, either credit or direct debit. The current account is a “current account”, which means that you can access your money at any time. Depending on the provider, account management fees may apply. On the other hand, credit interest is sometimes credited. People of all ages can open a checking account. Minors too, but with a parental consent form. On the way, an EC card or credit card ensures access to the checking account, which can be used to withdraw cash from ATMs.

Savings accounts for wealth creation

Savings accounts for wealth creation

Savings accounts have higher interest rates than current accounts, but often have notice periods. This means that you cannot access your money overnight. With the popular savings book, for example, there is a (at least) three-month notice period. Until then, you can withdraw 2,000 USD a month, but not more. Generally speaking, the longer the notice period, the better the interest on a sum of money. Fixed-term deposits have a particularly long term, where there is only a notice period in exceptional cases. Accordingly, the interest rate is more attractive here. The interest rate is fixed, as is the term. If there is any possibility of accessing the money invested, this is associated with fees. In most cases, this means considerable financial losses and makes the time deposit unattractive as a short- or medium-term investment. There is often also a minimum investment amount.

Fixed-term deposit account and daily account for different goals

Fixed-term deposit account and daily account for different goals

There is no multi-year term in the call money account. As the name suggests, you can access your money here at any time. In return, the interest on call money is correspondingly lower than that on time deposit; however higher than with the current account. The risk, if you will, is interest rate fluctuations that can occur daily, so the yield on a call money account also varies. In addition, a graduation is common: less interest is gradually paid out on a call money account. However, an account for fixed-term deposits and overnight money are the same in two respects: Interest is often paid quarterly or annually and there is statutory deposit insurance. There is a six-digit deposit guarantee in the area of ​​overnight money, and seven-digit deposit money.

Other account types: business account and custody account

Other account types: business account and custody account

Business accounts are often a must for entrepreneurs. So you can easily separate private money movements from business money movements and calculate the business profit without any problems. The advantages are sometimes offset by high account management fees. Alternatively, an online business account is sometimes offered free of charge. Not all accounts are used to store money: custody accounts are used to store and manage securities. A security deposit is mandatory for all types of bonds.

APR of a real estate loan: the elements that enter the calculation

Introduced by a European directive in 2008 and extended in 2014 to mortgage loan offers, the annual effective annual rate (APR) ex TEG responds first of all to a desire by the public authorities to protect the borrower.

While it is undoubtedly the best indicator to compare two offers of credit, its calculation is based on a complex formula and gives a result which is sometimes approximate, as demonstrated in this file.
Definition Items included in the overall effective annual rate What to do if your APR is wrong?

It expresses the total cost as an annual percentage. For this, it includes all the costs linked to the credit :

  • The annual interest rate
  • Borrower insurance contributions
  • Application fees
  • Guarantee costs
  • Brokerage fees where applicable.

Optional fees are generally not included in the calculation of the APR

Optional fees are generally not included in the calculation of the APR.

In the case of a revisable loan, the rate for the first period fixed in the mortgage contract (a month or quarter) is used. In this case, the overall annual effective rate in no way reflects reality, because the variability of the rate prevents knowing its cost in advance.

The comparison between 2 offers then becomes completely useless.
Important: in all cases, it is recommended to compare offers with the same duration.

The elements included in the calculation of the APR

The APRC includes a calculation method that takes into account all the compulsory costs linked to the loan. The technique consists first of all in calculating the overall cost of the loan in euros and then converting this cost into an annual rate. Note that two elements are already expressed in rates: interest and insurance premiums.

Items expressed as a percentage

Items expressed as a percentage

Interest on the loan

This is the most important point of negotiation because it is on the nominal interest rate that essentially depends on the total cost of the credit and therefore the APR.
This is the rate excluding insurance indicated in the commercial proposal. It determines the share of interest included in your monthly payment and which you will also find in the amortization table.

The interest rate must remain within the limit of usury rates fixed each quarter by the Banque de France. This rule is still respected by lenders, but if the rates for home loans are obviously far below the usury thresholds, those for revolving loans are dangerously close.

Insurance premiums

After the interest rate, it is the element that has the most impact on the cost of credit, since it generally represents more than 20% of the total cost. Only compulsory contributions are included in the calculation.
We can note at this stage 4 “anomalies” which limit the effectiveness of the APR in its role of objective comparator.

  1. If you choose a quota greater than 100%, for example, 140% (70/70), the contribution is taken into account is usually calculated on the basis of 100% of the loan. The part which covers the additional 40% is not taken into account.
  2. Optional guarantees like job loss are not included.
  3. If you change the insurance contract during the life of the loan, the APR is affected and no longer reflects the real cost of the loan.
  4. In the case of consumer credit, optional insurance is not included.

Be careful when comparing insurance rates, as some apply to the principal owed (in the case of insurance delegations) and others to the borrowed capital (group banking contracts).
Important: in force since 2013, the TAEA (effective annual insurance rate) remains little used by players in the borrower insurance market. However, it is of practical interest to the borrower since it suffices to add the APR to the credit rate to find out the APR (excluding first-year expenses).

Fixed costs charged at departure

Fixed costs charged at departure

Guarantee fees

Mutual surety is generally preferred by lending organizations which prefer it to real sureties (mortgage or privilege lender of money) considered too restrictive. The borrower finds himself there moreover in term of tariff. The cost is integrated into the formula and converted into a rate.
Here again we can see the limits of the APRC since the latter cannot take into account:

  • The reimbursement of part of the contribution, such as the part corresponding to the mutual guarantee fund returned by CREDIT LOGEMENT at the end of the contract.
  • Release fees in the event of a mortgage or IPPD levied in the event of early repayment.

Loan application costs

The administration fees are at the discretion of the bank and have very little impact on the calculation of the APR. Intended to cover the expenses related to the constitution and the analysis of the file, they can easily be negotiated. Their amount is also converted into a rate by the mathematical formula of the APR.

Brokerage fees

In the same way as administrative or guarantee costs, the remuneration paid to intermediaries must be included in the calculation. The bank has an obligation to inquire about the amount invoiced by the broker to his client.
Namely: the MURCEF Law prohibits the broker from cashing in any remuneration before the loan is disbursed.

Surety information costs

The law obliges credit institutions to inform sureties each year by registered mail with acknowledgment of receipt. This formality is most often invoiced to the borrower. Although a legal vagueness remains, if it is proved that the loan would not have been granted without the assistance of the surety, the information costs must be integrated into the annual effective annual rate.
Note: current home loans are flexible. You will impact your APR if you suspend or if you change the amount of the monthly payment.

Social accession loan : loan rate and conditions

The social accession loan (PAS) must be used to acquire the main residence which can be that of the borrower, his spouse or the ascendants and descendants. It is part of the aid put in place by the public authorities to help households access homeownership.

The social accession loan can finance the acquisition of new housing (detached house or apartment in a future state of completion) as well as annexes such as the garage. It can also be used to finance only the land.

Purchase of old housing

Purchase of old housing

This subsidized loan can also be used to purchase an old housing with or without work. For accommodation over 20 years old, you must have an inventory drawn up by a professional. This type of credit, therefore, takes longer to set up. This is why we suggest that you start your research as soon as the sales agreement is signed.

Works

Certain works may be financed by a loan for social accession such as.

  • Upgrading to habitability standards
  • extension
  • Transformation of premises not intended for housing
  • Energy saving

NOTE: the nature of the work that can be financed by a PAS loan is subject to a ministerial decree.

Other

In a much rarer situation, the loan for social accession can be used to repay a progressive loan agreement.

The conditions for obtaining the social accession loan

bank

Resource conditions

Obtaining the social accession loan is subject to a resource ceiling (see table below).

Depending on the date or the purchaser makes his request, the account will be taken of the tax income of N-1 if the beneficiary has received his notice of taxation or of the tax income of N-2 if the beneficiary of the loan for social accession does didn’t receive it.

What advantages?

APL (personalized housing assistance)

The main advantage of the PAS loan is that it gives entitlement to the APL (Personalized housing assistance). However, this aid is subject to conditions.

Insurance

The social accession loan allows the borrower or his spouse to benefit from a guarantee system in the event of unemployment. The operation is simple: in the event of unemployment, the monthly installments are deferred free for half for one year.

The formalities to be completed

You can only take out a social accession loan with a bank that has signed an agreement with the state, which is the case for most banks and credit institutions. 

The functioning of the social accession loan

money

Amount

The social accession loan can finance the entire operation, excluding notary fees, and can be combined with other loans.
However, it must not be less than $ 4,500 for new buildings and $ 1,500 for work

duration

The duration of repayment of a loan for social accession ranges from 5 to 30 years with a possible extension to 35 years maximum.

NO capped rates

Announced advantage of the loan for social accession, the interest rate is capped. In reality, this ceiling is higher than the rates practiced on the market at present. As with all loan offers, you have the choice between a fixed rate or a variable rate.

Reference rates are published quarterly.

Regarding variable rates, the maximum is set at 5.50% for mainland France and 6.15% in the French overseas departments and territories, whatever the duration of the social accession loan.

Mixed and tiered loans, new generations of effective loans?

Those who remember the Potato Cure may also remember the concept of a mix loan. It was a policy intervention that made it more expensive for homeowners to take out mortgages. Now we are introducing a different kind of mix loan to cooperative housing associations, but with the aim of making it cheaper to borrow.

When a cooperative housing association restructures loans, interest expenses fall and at the same time the repayment of the debt rises.

 

What is a mixed loan?

mixed loan?

If we already know the fixed rate and variable rate loan formulas, the mixed loan, as its name suggests, combines the two types. As soon as you sign this type of loan, it is therefore possible to choose how many years you will opt for fixed rate repayments and then move on to an adjustable rate. Generally, the first phase at a fixed rate is at least ten years, which very often makes it possible to benefit from a more advantageous rate than a credit with “traditional rate”, of a longer duration. Arrived at the end of this first period, it is then a question of switching to the credit taken out at variable rate. It will go down or up depending on the short-term interbank market rate.

Given the ambient uncertainty, and as few experts are betting on lowering rates, this type of “mixed” credit is advantageous when you are almost sure to resell your property before switching to the rate formula. variable. It is estimated, for example, that first-time buyers will stay in their first home for around seven years. It is indeed a question of being informed of interest rate variations, likely to skyrocket, and of not being cornered by excessively heavy monthly payments.

 

And the tiered loan?

And the tiered loan?

The step loan can be very similar to the mixed rate loan, with some significant loan details. It is a loan in stages of repayments, the amount of maturities of which varies according to predetermined periods. The borrower therefore has the possibility of determining different amounts of maturities per period: the stages.

The banking establishments which offer it thus allow the beneficiary to divide the loan in question into two lines of credit, with the aim of lowering the average rate. This type of loan also makes it possible to “smooth” the monthly repayments in the event that the borrowers have several credits in progress or, in particular, in anticipation of future debts. Please note, however, the reimbursement levels are fixed in advance when the contract is taken out and cannot be modified during reimbursement.

Warrants for loan applications

Option conditions

Option conditions

Warrants are securities. Today, they are mostly no longer issued in the form of effective certificates, but are instead deposited as global certificates and have quite different equipment features. The issuer, often a commercial bank or brokerage firm, specifies the exact specifications in the option terms.

In particular, these provide information about the underlying and price, type (European or American), subscription ratio (option ratio), term (option period) and special features such as a “money-back guarantee”, and are available to everyone free of charge in the form of a sales prospectus made available. Commercial banks and brokers also publish summaries of the option terms in the form of financial notices.

Classification

Warrants can be classified using the criteria “Underlying”, “Structure”, “Form of issue” and “Underlying”.

Warrants after the underlying

Warrants after the underlying

Initially, the underlyings for warrants were primarily shares. Large US stock corporations issued so-called stock-option warrants in the 1920s, which entitled the holders to acquire one or more shares in the respective company within a certain period and at a predetermined price. Nowadays, both call and put warrants are in circulation. They refer to different underlyings. The most important underlying financial objects are stocks and indices (share and index notes), interest rates or specific bonds (interest notes) as well as currencies (currency notes) and derivatives (notes on derivatives).

Interest coupons (structure)

Interest coupons (structure)

Compared to other notes, coupons have a special feature. They can be based on both bonds and interest rates. In the case of bonds, the strike price is a price and the intrinsic value is the difference between the price and the base price. Just like for stock or currency options, for example, the buyer of a call hopes that prices will rise, while the buyer of put will hope that prices will fall. In other words, call buyers expect interest rates to fall, and put buyers expect them to rise, which is due to the inverse relationship between interest rates and prices.

It is basically the same with notes based on interest rates. The call buyer benefits from falling interest rates, the put buyer, however, from rising. However, since the notes are based on an interest rate and not a price, a call has an intrinsic value if the interest rate on the exercise day is below the base rate, and a put if the opposite is true. The strange thing about warrants on interest rates is, therefore, that the purchaser of a call option (put option) expects the value of the underlying to decrease (increase). However, it should be borne in mind that the buyer of an “interest rate call” secretly, like the buyer of a “bond call”, is betting on rising prices, which in turn are caused by falling interest rates.

Basket option certificates

If a warrant is not based on a single share, bond or currency, but on a number of similar underlyings, such as ten different stocks from the automotive industry or five different currencies, this is also called a basket warrant.

Plain vanilla versus exotic warrants (structure)

Warrants with an underlying of the same type, for example equity, currency or index certificates, are either “simply structured”, “plain vanilla” in English, or “exotic”. Plain vanilla notes simply certify the right to buy or sell the underlying, in most cases there is cash settlement. The design of exotic notes sometimes differs significantly from the construction of plain vanilla notes. Exotics, for example, have a disproportionate leverage or expire worthless if a certain price threshold is exceeded. Depending on the distribution of opportunities and risks, the premiums understandably differ from those of plain vanillas. Compared to simply structured notes, they can possibly be higher or lower.

Classic versus bare warrants (form of issue)

Classic versus bare warrants (form of issue)

Warrants are either part of another security, such as a bond, a profit participation certificate or a share (“classic certificates”), or they are securities that are issued from the outset without another security, so to speak “naked”. For them, the term “naked” warrants is common.

Classic notes always certify the right to acquire a financial object, the underlying, within a certain period, the subscription period, at a fixed price, the subscription price. Therefore, they are never puts. The subscription right mainly applies to securities and is granted by stock corporations in order to make bond issues more attractive or to be able to raise debt capital on more favorable terms. The underlying securities mostly originate from the issuing company itself. Exercising a classic warrant on shares or bonds fundamentally leads to a change in the issuer’s capital structure. German stock corporations may therefore only issue certificates for the purchase of shares as part of a conditional capital increase. The approval of the shareholders is therefore always required.

In contrast to bare warrants, the underlying for classic notes is only created at the time of exercise. The issuer does not provide a pictorial explanation of the share or bond certificate until the option is exercised.

Naked warrants now represent the larger group of warrants. They certify both buy and sell options. The underlyings are already in circulation at the time the notes are issued, so that, for example, exercising a bare share call slip does not lead to an increase in the share capital of the AG concerned. This aspect can ultimately be neglected, since the issue conditions of naked warrants generally provide for cash settlement.

Covered versus uncovered warrants (underlay)

Covered versus uncovered warrants (underlay)

If the writer of a bare warrant has the underlying during the term of the bill, one speaks of a covered warrant or covered warrant. In principle, all those bare warrants that relate to specific assets, such as shares or bonds, can be issued as covered warrants. However, the term is generally only used in connection with bare share certificates.

The issues of covered share certificates are particularly interesting for insurance and investment companies. These generally have extensive securities holdings and can open up additional sources of finance by selling the warrants, especially if they are unlikely to be exercised.

 

Obtain a rental property loan without personal contribution

On condition of obtaining a loan to finance the purchase and related costs, rental property investment provides an appropriate response to borrowers who do not have personal contributions.

Whether you want to pay less tax, have additional income for retirement or build real estate, here are our tips for finding rental financing without contribution to the best rate conditions. 

Estimate your rental investment capacity

Estimate your rental investment capacity

There is no point in risking a loan refusal by presenting yourself to your banker with a poorly prepared file. Check your financing capacity before even launching the first research, which is a little more complex than when buying a main residence.

Firstly because the debt ratio is not understood in the same way and secondly because rental investment must take into account additional risks such as the risk linked to the absence of a tenant, but also the fiscal impact of rents on income.

Unless you have sufficient means, for a first rental transaction, it is probably better to start by buying an apartment rather than looking to invest in a property for investment, even if after reading specialized forums, becoming a rentier without any personal contribution seems to be the goal of many budding investors.

Calculation of the debt ratio after the operation

Do not make the mistake of thinking that your project is neutral because the rents cover the monthly payments of the loan. Even if the operation presents a perfect financial balance, it will always have a negative impact on the debt ratio.

Rental income is taken into account by the bank

bank

The amount retained by the bank for the calculation of the debt ratio corresponds to net income, that is to say, once all costs and charges have been deducted (loan interest, property tax, insurance contributions, etc.). ). In the absence of specific information, the lender can retain 70 or 80% of the gross rent.

Quantified example

Situation before investment

A couple has $ 2,800 in monthly net income. He owns his main residence for which he repays a loan up to $ 650 per month. Its debt ratio before the rental operation is 23.2%.

Real estate project

He decides to set up a first rental real estate project. He chose an old apartment with a sale price of $ 120,000 + $ 8,500 in notary fees. It is assumed that the rents cover the loan, home insurance (owner not occupying) and unpaid rents, as well as the property tax, or $ 720 per month.

Financing of the operation

The financing is done without contribution up to 110% with a real estate loan of 128,500 $ over 20 years at a fixed depreciable rate of 1.62% and an insurance rate of 0.35% on borrowed capital. The monthly payments amount to $ 665, including $ 37.48 in insurance premiums.

Impact on the debt ratio

His income now amounts to $ 3,520 (salaries + rents) and the repayment of loans to $ 1,315. The logical consequence of the rental loan, its debt ratio is also changed and climbs to 37.3%.

Analysis

Despite the fact that rental income covers all expenses, the couple’s debt ratio has increased significantly. This consequence is, however, more “arithmetic” than financial and in no way calls into question the obvious good operation carried out by the couple and the expected good rental yield or the financing of the property.

Tax impact and reintegration of property income

Tax impact and reintegration of property income

The net property income determined in Annex No. 2044 is taxed in the same way as wages when you file your tax return. You must, therefore, take into account the tax impact in your future budget estimate.

You will find several simulators on the Internet, including that of the tax administration site. Namely: if the amount of annual rents does not exceed $ 15,000, you can opt for the micro-land regime. You benefit from a standard abatement of 50% and do not have to complete form 2044.

The importance of forecasting

The essential elements of the risk analysis are obviously based on the good financial health of the investor (CDI, good bookkeeping, correct debt ratio, sufficient living left…), but the presentation of the real estate project is an aspect of mounting the file that should not be overlooked.
Establishing a provisional rental budget must be thought of as a business plan and generally meets a threefold need:

  1. Allow the investor to verify the profitability of the investment.
  2. Demonstrate to the banker that your financial package is based on objective data.
  3. Prove that your mortgage application is solid.

It must include a realistic simulation of income and expenditure and be based on comparative elements such as rents charged for the same type of property in the neighborhood. You can rely on local real estate ads for this.

You will find in this article all the details to build an effective rental forecast and convince the lender that the project is viable.
To know: remember to gather all the supporting documents: property tax of the seller, rental announcements, simulation of tax impact, rental insurance quote … You will show your seriousness and prove to your banker that you are determined to lead ultimately your project.