If you have the equity necessary to buy your home, you will not have to resort to credit. But, be careful not to swallow up all your savings in the purchase price of your home alone. Buying a property comes with a lot of costs . Also plan a reserve budget to deal with any work, especially if you have not opted for a new home.
If, like most Belgians, you need to take out a loan to finance all or part of the amount requested, be aware that there are several forms of credit that can be used in the context of a property purchase.
Mortgage credit
Mortgage credit is the most common form of credit used to finance the purchase of real estate. The credit agency provides you with the amount necessary for your purchase. Each month you repay part of your loan, according to an agreed repayment plan. You also pay interest.
To guarantee the repayment of the sums due, generally the credit agency will ask you for a mortgage on your home.
To determine the amount you will be able to borrow , the credit agency will take into account:
- The value of the home you want to buy.
- Your contribution of money (thanks to your savings and perhaps the financial assistance of a relative for example…).
- The ratio between the amount you want to borrow and the value of the home. This is called the quota.
- Your income.
The level of income of the future owner is a determining criterion in the decision of a bank to grant or not a mortgage loan. The bank will examine whether this income will allow you to repay the capital borrowed, as well as interest and the insurance premium for outstanding balance insurance.
Example
If you have an income of 2000 euros per month but the monthly payment of the loan amounts to 1010 euros (which corresponds to a loan of 200,000 euros over 20 years, with a fixed rate of 2%), you risk to be refused by the bank because the monthly payment is too high in relation to your income.Example: If the value of the home you want to buy is estimated at 150,000 euros
But if you are applying for a mortgage loan of 165,000 euros to cover part of the costs related to this acquisition, it is a safe bet that the lender will refuse the loan. Don't forget that your home will be used as collateral to repay your credit through a mortgage registration. In our example, the collateral, namely the value of the house, is not sufficient to cover the amount lent.
Note that each bank has its own criteria for granting or not granting a mortgage loan.
Consumer credit (installment loan)
Even if mortgage credit remains the most common formula for financing the purchase of a home, consumer credit can be an alternative for smaller amounts . The basic mechanism is identical: you repay the amount borrowed at fixed dates, and you pay the agreed interest.
Compared to a mortgage loan, consumer credit has certain advantages such as lower costs. But beware, the interest rates for consumer loans are significantly higher than those for mortgage loans.
The bridging loan
Bridge credit (or bridging credit) allows you to borrow money for a short period of time . Imagine: you have fallen in love with a house. To finance the purchase of this favorite you must resell your apartment. Your apartment will probably not be sold yet when you sign the deed of purchase for your new home. Thanks to the bridge loan, you can finance the purchase of your new house without rushing the sale of your apartment. You repay your bridging loan as soon as your apartment is sold. In the meantime, you pay interest on the amount of the bridging loan on the due dates.