Personal contribution is often presented as the cornerstone necessary for the success of any real estate project. By putting on the table 10 to 30% of the total amount of the transaction, you instantly reassure the banker as to your seriousness and your savings capacity.
However, is it totally excluded to obtain a mortgage without any contribution, and financing more than 100% of your future main residence? Although it is often similar to an obstacle course, the validation of a file without contribution remains possible in some banking establishments… Subject to presenting in addition a profile of impeccable borrower and knowing how to find the right arguments to convince !
Obtain a mortgage without contribution? Difficult, but not impossible
In the context of a mortgage without personal contribution, the lending bank advances all of the funds necessary for the acquisition of the property. “We are talking about 100% financing, or even 110% financing when the borrower does not assume the notary, brokerage and guarantee costs either,”
- 100% financing : the bank pays the purchase price of the property. The borrower must still assume the payment of the notary, guarantee, file and brokerage fees;
- 110% financing : the borrower has nothing to settle from his personal savings. The costs of guarantee, brokerage, file and notary are assumed by the bank loan. Concretely, the “100%” are dedicated to the real estate while the remaining “10%” allow to pay the various costs.
Good to know : notary fees represent around 7% to 8% of the sale price of an old house or apartment. Or for a property of $ 200,000, approximately $ 15,000. A substantial sum that not everyone can assume. 110% financing then has its full role to play.
Very widespread at the end of the 2000s, home loans without personal contribution have become much rarer since the economic crisis of 2008 and the tightening of selection criteria at many banks, which favor solid borrowers who already have a good level personal savings.
By looking well, it remains possible today to get a mortgage without advancing a single penny, or almost.
Indeed, all banking establishments wish to develop their clientele and not all have the same granting criteria.
Who is granted a mortgage without contribution?
In fact, three types of borrowers may have to request full financing for their real estate project:
- Young households, very recently entering the job market, who want to buy two without necessarily being married and who have not yet had the time to build up a substantial savings. Older households may also be affected by this lack of savings. However, it is necessary to justify this problem: recent divorce, real estate purchase, etc.
- Borrowers with significant savings (passbooks, stocks, life insurance, etc.), but who do not wish to divest it to buy their property. This strategy can be all the more coherent and profitable when mortgage interest rates are at their lowest, as is currently the case. If you get a 2% loan, for example, what good is it to empty an investment that earns you 3.5%?
- Investors in rental property. For the latter, 100% financing makes it possible to take full advantage of the leverage effect of the credit and the tax deduction of loan interest.
How to apply for a mortgage without contribution?
The absence of any personal contribution can be envisaged, but must in this case be absolutely compensated by an exemplary file concerning the other criteria examined by the banker.
The latter, for example, will be ready to hear that your recent arrival in working life has not yet allowed you to save significant amounts, as long as you justify a stabilized professional situation (permanent contract for more than a year)., employment in the public service) and a comfortable income or expected to increase rapidly. The same applies if you come out financially affected by a divorce or a long illness.
In addition, a borrower without contribution must manage his finances responsibly to reassure and convince the bank. Account statements for the last three months must not show any payment incident or direct debit rejection. Respond sincerely to the questions asked if you want the slightest chance of obtaining real estate financing without any contribution.
Mortgage without contribution: what interest rate?
In fact, there is no precise distinction between mortgage loans with and without contributions. However, the bank advisor’s analysis is often different. Indeed, without contribution, the risk for the lender is higher.
In case of default by the borrower, the amount of the loan to be repaid through the activation of the guarantee (mortgage guarantee or surety) is higher. This is particularly true in the case where the financing includes the amount of the real estate purchase and the ancillary costs (guarantee costs and notary fees), an operation which is otherwise called 110% financing.
A higher risk is then compensated by an increase in the margin of the banking establishment and therefore in the interest rate applied. To obtain the best conditions, the file submitted must therefore be very well prepared. In addition, it is essential to contact several banks or to involve a mortgage broker.
Finally, it is important not to focus only on the nominal interest rate, but also on the cost of borrower insurance and on the APR (annual effective annual rate).
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Mortgage without contribution: how to properly prepare your application?
Obtaining the best mortgage loan offer without input necessarily involves a good preparation of your file. It is therefore necessary to highlight the strong points linked to the project itself (quality of the property, potential, purchase price, etc.) and its personal, professional and financial situation (income, low debt, etc.).
All these elements must be supported by convincing supporting documents such as salary statements, account statements, photos of the property financed…
It is possible to apply directly to financial institutions or to use the services of an intermediary specialized in real estate financing: the broker. This last possibility makes it possible to ensure the quality of his file and to refine it according to his advice.
How to make a mortgage simulation without contribution?
Do you want to know the amount you can borrow or the associated monthly payment? Performing a first mortgage loan simulation is an important step during an acquisition project.
Indeed, this allows you to project yourself and know what type of house or apartment to select. By targeting a specific budget, future owners save precious time.
To get a mortgage loan simulation, the quickest solution is to use a simulator available online. To refine this first draft, it will of course be necessary to approach a bank advisor or a broker.
Make a first draft of your financing plan
Do not hesitate to use one of the many simulators or calculators available on the Internet to make a first projection of your financing plan, and judge for yourself the realism of your project. In general, a loan without contribution will be more likely to be validated if it presents :
- A zero or moderate increase in your expenses. If your future monthly payment is equal to or very slightly higher than the rent you are currently paying (and without any incident of payment of course!), The project will seem much more viable to your banker.
- A “living space” large enough to allow you to easily cover everyday expenses.
It is also essential to draft a financing plan. The financing plan consists of balancing the following two points:
- Jobs, i.e. all expenses: the purchase price of the property, the work to be carried out, agency fees, brokerage fees, notary, warranty and folder…
- Resources, which correspond to the constituent elements of financing: the mortgage, the contribution, the subsidies, etc.
Subsidized loans: a winning strategy
By extension, the bank considers as a personal contribution any amount of money that it must not advance itself. This is particularly the case for all “assisted” or “subsidized” loans such as the zero rate loan (PTZ), the housing savings loan (PEL), the housing action loan, CAF credits, loans to civil servants, etc.. Take the time to find out beforehand about all the devices you can benefit from.
The zero-rate loan, in particular, is enjoying an undeniable popularity among first-time buyers or for all those who have not owned their home for at least two years. Since 1 January 2016, the eligibility requirements have been made less stringent and the supported amount can now reach up to 40% of total funding.
Obtaining a mortgage without contribution: the advice of your expert
If you have no personal contribution to support your file, the use of a mortgage broker is highly recommended ! This professional will take care of canvassing for you the various banking establishments from his address book, generally well stocked, and will come back to you with the most attractive offers. His bargaining power can make the difference and give you the little help you needed to gain access to property.
The bank, moreover, will be less choosy if you offer not only to host your income there but also to subscribe to some of its “house” products… To start of course with the borrower insurance that it offers.
Better to finally be realistic about your acquisition project. It may be wiser to give up, for example, incorporating certain work into the loan requested, which will have the effect of reducing the financing required as well as your future debt ratio.