Mar 16

Annual termination of borrower insurance: what impact on medium-term credit rates?

It was not a foregone conclusion ! After a long battle, the Constitutional Council finally ruled on Friday, January 12, on the validity of the Bourquin amendment, a measure allowing any borrower, regardless of the date of subscription of his credit, to change each year the contract of insurance borrower. If this is good news in the short term, which should generate substantial savings for certain borrowers, Lite lender, a network of 170 credit brokerage agencies wonders about the impact of such a measure in the medium term… Because the fact that all contracts can be renegotiated risks weighing on the profitability of the banks, which will have to compensate for the shortfall generated. In the end, this could contribute to the rise in mortgage lending rates in 2018, in a context of price increases too …

Elders validate annual termination of loan insurance

Elders validate annual termination of loan insurance

The Constitutional Council ruled on January 12 on the validity of the measure allowing any borrower to change each year a borrower’s insurance contract.

From now on, all loan insurance contracts, including old ones, can be terminated on the anniversary date and be replaced by another one, provided that the guarantees are equivalent and that the bank accepts this new contract.

This was already the case, for contracts signed since March 2017, as part of the Bourquin amendment (article 10 of the law of February 21, 2017) which provided for an annual right of termination beyond 1 year for all contracts.

At the end of October 2017, the Lite lender bank, had filed an appeal with the Constitutional Council to contest the application of this right of annual termination for the stock of old contracts, that is to say those signed before on February 22, 2017, banks fearing massive departures of their youngest borrowers towards cheaper insurance, which would call into question the risk pooling model.

A risk of rising credit rates …

A risk of rising credit rates ...

Indeed, in some banks, more than a third of the stock of loan contracts could be affected by the annual termination. “After the wave of renegotiations of credit rates, we will attend this year the renegotiation of loan insurance … Young people in particular will be concerned, because they are the ones who compare the most and may also have an offer of more advantageous insurance with savings at stake… This will inevitably destabilize the banking world which holds 80% of the borrower insurance market, which could have consequences, in particular on credit rates… ” analyzes Sandrine Allonier, director of You finance bank relationships.

“In the short term this is good news for borrowers, of course … But in the medium term, the fact that the stock can also be canceled will weigh on the profitability of banks. Indeed, the borrowers concerned are essentially those who have taken out a loan recently, therefore at very low rates as we have known them for 4 years, and on which the banks’ margins could become negative after the fact once the insurance is terminated… In In this context, it is certain that the banks will have to find a way either to keep their borrowers or to compensate for the shortfall, which could contribute to a gradual rise in credit rates even when we were expecting rather stable rates at the start of the year… ” analyzes Jérôme Robin, president and founder of Lite lender.

Significant savings at stake

Significant savings at stake

Against all expectations, people with illness will find it beneficial to terminate their borrower insurance. A real opportunity. As proof, this 43-year-old man suffering from melanoma who borrowed, at the beginning of 2006, $ 220,000 over 20 years with cover in the event of death at a rate of 0.72% (0.34% + 0.38% surcharges). In January 2018, it will be able to find new cheaper borrower insurance, around 0.07%, by asserting its right to be forgotten. He will thus achieve a significant saving of $ 13,500, in this case, $ 125 per month of remaining credit, according to Magnolia.

Savings also in the event of a change in situation which is not to the benefit of the insured

The same will apply in the event of a change of situation which is not to the benefit of the insured. The example of this PACS couple under 30 is the perfect illustration. In January 2016, they contracted a loan of $ 300,000 over 15 years with a loan insurance rate of 0.30%. In the meantime, the spouse changes professional activity for a so-called “at risk” profession. As some insurance delegation contracts do not distinguish between “at risk” and “traditional” professions, the couple can claim new insurance at a rate of less than 0.09% as of January 2018. They will thus realize a gain of 18,800 $, or 120 $ less expenditure per month compared to their initial insurance.

In the event of illness, it should be noted that some are considered to be very mild by certain insurers, who will not offer a premium or a minimal premium, as for diabetes.

The most significant savings for those under 40

The most significant savings for those under 40

Banks are wary of borrowing from older people. For good reason, with the years, the medical history is more numerous and the probabilities of not repaying the loan until its term are higher. “This population will therefore tend to think that it is in their interest to keep their insurance, especially if the loan was taken out several years ago. However, and even in this situation, savings are not impossible.

But unsurprisingly, the people who will make the most savings remain those under 40 in good health and with a stable professional situation: nearly 10,000 USD per person for a loan of 250,000 USD over 20 years, with a rate of initial group insurance of 0.30%, renegotiated to 0.06 according to a simulation of Magnolia. In short, 2018 is off to a good start for borrowers.

Feb 19

When do I have to pay the installments for a loan?

When exactly you have to start paying back your home loan depends on several factors. First, the start of repayment is affected by whether you are building or buying a house. On the other hand, the time depends on what you have agreed with the financing bank in your loan agreement. It is difficult to make a general statement about it. We will explain the common types of repayment to you.

Loan repayment when buying a house

Loan repayment when buying a house

 

When you buy a house, the question of when the first installment is paid can be answered quite easily. Because in the course of buying a house, the sum for the property and the house is paid out in one fell swoop, so that you can pay the entire sum for the property. This means that payment in installments will begin and begin after the loan is paid out. You can find the exact time in your bank’s financing contract.

But it can also happen that you have arranged a different date for the first installment with the bank. It is therefore advisable to take a look at the contract documents to be on the safe side.

Loan repayment for a new building

Loan repayment for a new building

 

However, if you are about to build or want to build a house, a little more explanation is needed to time the first installment. Because in the course of building a house, the bank transfers the money piece by piece depending on the construction phase and not in a large amount as when buying a house. If, for example, the floor slab is finished, the bank transfers the amount X to you or the corresponding construction company, and if the roof is finished, the amount Y is due and transferred.

Most of the time, you start paying interest on the bank by paying the first installment of your construction loan. For the period between the start of construction and the move-in, this means a double financial burden for the building owners, since rent for the current apartment often has to be paid. What you have to pay to the banks during the construction phase is only the interest – so you do not pay off the pure loan during the construction phase.

Example calculation

Let’s say a certain section of your house has been completed. For this, 50,000 dollars are now due, which the construction company would like to have from you. You submit the invoice to the bank and the bank transfers the money to the construction company. Then interest payments are due for the money paid out – but only for this subtotal of 50,000 dollars and not yet for the entire loan amount. In our example, you pay two percent interest a year. We show you exactly what this means for your wallet every month:

USD 50,000 x 2% interest: 12 months = around USD 83 interest per month

From the time of payment, the bank collects around EUR 83 interest per month from your account. If you need another 25,000 dollars from the bank in the next construction phase, the interest will then be added to the 83 dollars per month. This continues until the full loan amount has been paid out to you. Then you start with the repayment – that is, with the repayment of the actual loan. The rate that will be debited from your account from this point onwards consists of a portion of the repayment agreed with the bank and (in our case) two percent interest.

Agree and observe the commitment-free time

Agree and observe the commitment-free time

The bank has the money that you borrow from it for building a house ready for you. During this time, the bank cannot use or invest the money in any other way. As a rule, this can be paid with so-called commitment interest. A certain interest rate – for example 0.25 percent – of commitment interest is then calculated per month for the loan amount that has not yet been called. This can drive up the cost of mortgage lending.

It is therefore important that you agree on a provision-free period with the bank. Because then this additional interest does not accrue within twelve months, for example. However, this also means that you have to use up the entire loan within this time, otherwise commitment interest will accrue from the 13th month. This is especially important to know if construction should be delayed. Therefore, also agree with the developer on a precise schedule for when which construction phase should be completed. This will save you unnecessary interest payments.

Feb 18

Credit with final installment calculator

Good to know if there are problems with the loan completion calculator. Are you planning to take out a loan because of desired or urgent items such as B. have to pay for a vehicle, a cell phone, a vacation trip or other large purchases? On the other hand, you have no current pension, salary or salary income, but simply receive unemployment benefit or an education allowance?

Where can I get a credit for the final credit calculator even with bad credit ratings?

credit ans calculator

It has certainly happened to everyone before – an economic bottleneck has occurred and some invoices do not tolerate deferring payments.

Of course, a possible variant would be to borrow the money from relatives or friends. However, it is not always possible to ask relatives or acquaintances for funds for the “Credit Final Calculator”. A poor rating or entry with lender makes borrowing difficult if, on the one hand, the creditworthiness is correct and, on the other hand, no lender contribution is available.

You may not want to admit it, but you can get a loan with no credit report or bad credit. There are currently serious credit intermediaries who specialize in obtaining loans from foreign banks, companies with poor credit ratings or bad creditworthiness. Basically, the main task of an intermediary is to help you find a suitable loan.

The experienced intermediary will advise you on the financing offer, show you all the advantages and disadvantages and support you in creating the documentation for the loan application. Smaller financial institutions often have better conditions for final credit calculators than large, established credit institutions. An application for lending to the loan calculator at a normal house bank, however, would be almost unsuccessful.

The best-known credit institutions that provide their services via the network. The two intermediaries concentrated in particular on areas such as the credit end calculator. How do you recognize serious and dubious credit institutions? If an intermediary is a reputable partner, he has a serious need to help you obtain a credit for a credit terminal.

In the meantime, consumers have not only found the way to their house bank, but also the network to get a loan from a foreign bank that is tailored precisely to their needs. The guidelines for granting loans, which are significantly simplified compared to Germany, speak for a foreign financial institution. For this reason, poor creditworthiness or a positive lender entry on the subject of the final credit calculator plays only a minor role.

Basically, it is the private loan credit institutions that refinance loans that broker through the network. When it comes to final credit interest rate calculators, this target group, in particular, has a very difficult time granting a loan. Private individuals with financial problems can often not take out a loan. Due to indebtedness or bad creditworthiness, the financing chances are considerably reduced.

In such cases, the last possible option would be a private loan.

It is a loan granted by a private financial institution

money with rates

As a rule, such credit institutions do not carry out lender queries, which of course greatly simplifies the search for loans. With regard to the subject of credit closing rate calculators, this situation can almost be described as an ideal means. These are the following points.

Certain proof of income and securities from private loan financial institutions are of course also required for the granting of credit, although a credit check is mandatory before the loan is granted. However, if you have a generally good credit rating and entry into the power of disposal of the foundation is the only financing problem, private loan credit offers a realistic variant for the credit end calculator.

What is important when calculating the last credit installment? If the loan is sufficiently variable, you will experience problems repaying the loan much less often. A good credit finance business on credit end-calculator should provide all of this. With regard to the subject area of ​​the credit rate calculator, the funds required should generally be measured as precisely as possible from the start.

Therefore, you should keep the amount of the loan as low as possible.

It is better to compensate for the narrow requirements with follow-up or additional financing

money financing

If you need a loan, you should assess your financial situation as realistically as possible and keep an eye on your own income and expenses – even when it comes to loan installment calculator.

Anyone who gives the house bank the impression of a reliable business partner by following the recommendations for action mentioned should always work with the loan and then also with the credit rate calculator.

Jan 29

APR, what it is and how it is calculated?

 

APR is the acronym for Annual Global Effective Rate and represents the final and actual expense linked to the request for a loan.

Also known as the Synthetic Cost Index ( ISC ) and represented as a percentage value, the APR includes in itself both the “pure” interest rate and all the ancillary expenses of a loan.

Use the APR to compare loans

Use the APR to compare loans

The main use that is made of the APR is that of comparison, that is of comparison between two loans to go in search of the most convenient. Generally speaking, we say that, among various loans, the one with the lowest APR will be the most convenient in terms of cost.

How is the APR calculated?

How is the APR calculated?

The calculation of the APR is slightly “complex” due to the fact that it also contains, as mentioned, all the accessory costs of the loan.

However, let’s take an example to better understand the concept (all the percentages and amounts indicated below are only examples, they may not show real values).

  • Loan amount: $ 10,000
  • TAN interest rate: 5%
  • Initial expenses: 100 $
  • Periodic expenses: $ 1 per month
  • Duration of funding: 60 months

The sum of the extra costs, calculated for the entire duration of the loan (60 months), is 160 USD which are added to the interest expense (equal to 1,322.74 USD).

The final cost of the loan will therefore be 1,384.74 USD, for an APR of approximately 5.78%.

As can be seen, the final expenditure is slightly higher than the nominal annual interest rate TAN only.

The APR according to the law

The APR according to the law

Italian law introduced the concept of APR for the first time in 2003, with Resolution no. 10688 of 4/03/2003, art. 9 paragraph 2, of the Inter-ministerial Committee for Credit and Savings, which pointed out to the Bank of Italy the need to identify an interest rate that could be representative of all the charges linked to a loan and which, therefore, would be been the expenses of a customer in applying for a personal loan.

Thus was born the APR, which is calculated by adding TAN + preliminary costs + practical management costs + compulsory insurance + state stamp.

The APR, on the other hand, never includes the taxes that must be paid on loans (such as registration taxes in the case of home loans) and insurance that are not mandatory.

Differences between APR and TAN

Differences between APR and TAN

The main difference between APR and TAN is clearly that of the type of costs that the percentage value represents. In the case of the APR, there is a more truthful indicator of the final cost of the loan and therefore this index is always preferable to the TAN in the loan installment calculation.

Jan 11

Loan in fine: repay your principal when due!

Loans are among the different types of credit. Unlike the repayable loan conventionally used for the financing of a real estate, the credit in fine gives the opportunity to the borrower to repay the totality of the capital due in a single payment, at maturity of the contract. The advantage? The monthly payments are only used to pay the interest and thus prove to be less important than in the framework of a traditional loan. Explanations.

How does a loan ultimately work?

How does a loan ultimately work?

By definition, a loan in fine works in reverse of a conventional loan. While the depreciable credit consists in repaying its capital while paying its interest to the lending establishment, the loan in fine offers a singular possibility: to repay the totality of the capital at the end of the contract, in a single installment.

If you choose this option, you will still have to pay monthly payments. But these will only include interest (as well as borrower insurance costs), not principal.

The advantage? During the entire term of the loan, you can place the money saved on a savings book or life insurance, and thus capitalize enough for the final repayment of the mortgage in fine. Or decide to resell the property to settle the loan.

Who is the priority for a loan in fine?

Who is the priority for a loan in fine?

The loan in fine is not a conventional mortgage. It is rather intended for the financing of a rental investment because of the tax advantages to which it gives right:

  • Loan interest can be deducted from collected property income;
  • If this rental income turns out to be lower than the interest on the loan in fine, it becomes possible to charge this land deficit against taxable income.

In fact, the interest of the mortgage ultimately is mainly tax: it allows you to make significant tax savings, especially in the event of a high tax rate … And to place the unspent money in monthly payments, so to earn savings income!

Jan 09

Want to save on a passbook A? Prefer early loan repayment

With the rate going down to 1% soon, this investment becomes more than ever precautionary savings. Because it is more profitable to increase the monthly payments of his mortgage rather than depositing his savings capacity on a passbook A. In particular for the owners who bought a few years ago, when the rates were high. Demonstration by example.

Savings on passbook A vs early redemption

Savings on passbook A vs early redemption

Let us assume that a household has a capital of $ 10,000. If they choose to place it on an A passbook, assuming that the rate remains at 1% they will generate $ 1,146 of interest in 10 years.
Now assume that this household has a mortgage of $ 150,000 over 12 years, which they took out in August 2012. They therefore have 10 years of repayment. Suppose they benefited from a rate of 3%. If this household injects its capital of $ 10,000 into its home loan, it will gain nearly 1 year of repayment, representing a total savings of $ 3,330.

This example shows that identical capital, used over an identical period, leads to a better return. A logic that Jérôme Robin , Founding President of Cream bank, summarizes: “The French who currently have a mortgage have for the most part subscribed at a rate much higher than those we currently know, and also higher than the remuneration of the passbook A. Under these conditions, making an early repayment is the best way to invest your money, the one that will bring the best profitability, especially for those who have taken out loans at 3% or more… ”.

Booklet A remuneration rate vs mortgage loan rate

Booklet A remuneration rate vs mortgage loan rate

The rate of return on the passbook A

The Lite lender is an investment whose purpose is to allow savers to keep up with inflation. Its rate of return is therefore logically focused on the evolution of the cost of living index. It can be revised twice a year, at the decision of the Ministry of the Economy and Finance, which chooses whether or not to follow the recommendations of the Director.

However, the consumer price index of June 2014 shows that the cost of living, increases by + 0.5% over 1 year. Prices remain generally stable overall compared to May, and even decrease in certain food, clothing and health sectors.

From this perspective, it is logical that the rate of return on the Lite lender decreases. And that is what will happen on August 1, 2014, when his remuneration will drop from the current 1.25% to 1%.

Home loan rates

Home loan rates are at an all time low. The Cream bank observatory shows that the lowest nominal rate obtained in the past 6 months is 2.49%. And even at this historically low level, it remains higher than the rate of return on the passbook A. This means that an early repayment will necessarily allow the saver to optimize his money.

The history of mortgage loan rates, as identified by the CSA / Astro Finance observatory, shows us that first-time buyers who borrowed in the last quarter of 2008 were only able to obtain rates above 5%.

In view of these figures, households with capital or even just a savings capacity will find it more beneficial to consolidate their mortgage than to save on a Lite lender, and here’s how.

How to optimize your mortgage with savings

How to optimize your mortgage with savings

Use the modularity of the deadlines

This tip is for households who do not want to inject available capital into their mortgage, or who simply do not have this capital. They have the possibility of using their savings capacity to increase the payment of their monthly payments. So, rather than depositing a certain sum every month on a passbook A which does not bring anything any more, they will reimburse their mortgage more quickly, and will thus pay less interest in the long term.

Sandrine Allonier , responsible for bank relations with the broker Cream bank, explains. “Most of the loans taken out in recent years are flexible, that is to say that after one to two years allow you to increase or decrease your monthly payment or to make early repayments in exceptional cases… It is a real flexibility for the borrower, with substantial savings! “.

Partial prepayment

Households with capital can inject it into their mortgage, as an exceptional partial repayment. The lender cannot refuse, if this partial injection is at least equal to 10% of the principal remaining due. However, partial or total reimbursement is accompanied by the payment of compensation. The transaction may therefore not be viable for the borrower.

To calculate the relevance of a partial repayment on a home loan, it is necessary to engage in the following 2 calculations:

  • Capital remaining due multiplied by 3%.
  • Addition of the next 6 monthly interest payments.

The smaller of the two amounts will be that of the early redemption indemnities. This calculation basis allows the borrower to assess the relevance of the transaction.

The repurchase of mortgage

Owners with capital, or with savings capacity, or both, may find it beneficial to redeem their mortgage. Today, loan rates are at their lowest, if they had borrowed a few years ago above 3.5%, they could perhaps get less than 2.5% today.

If they have greater savings capacity, they therefore have greater monthly repayment capacity. The monthly payments would thus be increased according to this capacity, but taking into account a more attractive rate. This formula undoubtedly leads to savings in interest over time.

It is also possible to inject existing capital into a mortgage loan repurchase. In view of the investment returns today, it is undoubtedly preferable for the saver to return to the fundamentals: the stone.