A bank loan is contracted when a person needs a certain amount of money to finance a real estate project . The borrower applies for credit with a bank.
Bank loan definition
The bank loan is issued by all real estate credit institutions for the financing of all types of acquisitions or even real estate work. These are the same institutions that set the mortgage rates and the fees for their loans.
Thus bank credit is materialized in the form of a sum of money that a banking institution lends you. The repayment is made over a period that you have determined with your bank and indicated in the loan offer.
What is the rate of a bank loan?
The bank loan rate is the interest you have to pay back to the bank in addition to the loan amount. This rate is included in the monthly payments of the loan that you repay.
The rate can be a fixed rate or a variable rate, it will be up to you to determine it with your banker or broker when signing the loan agreement .
It will be determined according to your situation, your personal contribution and your borrowing capacity. These criteria are different depending on the bank, that’s why the rate you can get will not be the same from one bank to another.
Do not neglect the mortgage loan insurance rate, when it is integrated in the loan rate is called APR (annual percentage rate) that can affect the overall cost of your home loan.
what elements come into play in a bank loan?
In order to obtain a bank loan one must take into account all the data below:
- The rate of mortgage: The rate of mortgage is to be considered during your loan project. Indeed, your usual bank will not necessarily offer the best rate for your credit and it may be interesting to compete with banking organizations to obtain a more advantageous offer.
- The amount of money borrowed: The amount borrowed is the amount you want to borrow to buy your property. On the other hand, we must pay attention to the additional costs that may be added to this amount. To find out how much your loan will cost, you must calculate the Total Effective Rate (TEG), which is the total sum that will cost you your loan.
- The duration of the credit: The duration of the credit is important since it is a commitment over a long period. You have to make sure that you will be able to repay the loan over its entire duration without falling into a situation of over-indebtedness.
We can observe relationships between these three criteria. Indeed, the longer the duration of your loan, the higher the rate will be because the risk of non-repayment is higher for the bank.
To find the best rate relative to your profile, you can go through a mortgage broker. Expert real estate loan, he can solicit for you banking organizations and negotiate for you allowing you a saving of time and significant money.
What type of bank loan should I choose?
You have the choice among different types of bank loans, it is necessary to determine well in advance the loan that corresponds to your real estate project. Depending on your profile you may or may not benefit from a loan.
- Mortgage loan
- Zero Rate Loan
- Housing savings loan
- Ready to social accede
- Relay loan
- Transferable loan
How to reduce the rate or duration of my bank loan?
If you have borrowed at a time when the rates were high or you did not compete with your bank, you can probably renegotiate your mortgage.
Credit renegotiation provides a lower rate for your current loan. This can reduce the cost of your monthly payments or reduce the duration of your mortgage. in general, the repurchase of credit is interesting if one observes a difference of 0.7 between the rate of your credit in progress and the current rates and that the capital remaining due is of at least 50 000 €.
Going through a broker who will go to the banks for you will allow you to get the best rate.