© © Unsplash/Amina Atar
If you follow the real estate market at all, you should know that at the moment there is nothing very exciting about it. The reduction so hoped for by potential buyers does not live up to their expectations, and will in any case probably never compensate for the explosion in borrowing rates which have gone from 1 to 4.5% in just 2 years.
Thus, few people wishing to access property can afford to do so during this complicated period. However, an old rule that was previously abandoned is back, and could allow some to to project themselves as owners again.
The return of 30-year real estate loans
It was in June 2021 that it was banned from banks to offer credits that exceeded 25 years, and yet, the instructions have now been modified.
It is once again possible for banks to offer real estate loans over 30 years, which will give borrowers the possibility of reduce the cost of their monthly payments, and possibly fall below the 35% maximum debt rate in order to be granted a real estate loan. Just be careful of the cold shower that accompanies this news.
A longer credit, but also much more expensive
In fact, who says extended loan duration, also says credit which costs more. If this 30-year loan allows borrowers to increase their borrowing capacity, reduce their debt ratio and have a lower monthly payment than on a 25-year loan, the rating remains very salty.
Indeed, if some banks offer a rate of 4.15%, < strong>most offer rates that easily exceed 5%, which of course increases the entire cost of credit significantly compared to a 25-year loan. According to our simulations, taking into account a loan of 200,000 euros, over 25 years, the total cost due would be 348 103 euros with a rate of 4.4. For the same loan for 30 years, the total loan cost with a rate of 5% would be 408 111 euros, or 60 008 more, with only 30 euros in monthly payments less as an advantage.
Suffice to say that, even if taking out a 30-year mortgage loan is possible again, that does not necessarily mean that it is a good idea to do so. If it had been banned, there was a reason after all.
- 30-year real estate loans were banned in June 2021.
- Only, given the impossibility of many to access property, they are making a comeback.
- Sometimes allowing them to go below the threshold of the maximum debt rate, they still remain very expensive for potential borrowers.
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