The financial terms of the loan a bank grants you depend directly on your borrowing profile. This profile includes all characteristics that the lender considers before making you an offer, as well as defining the financial conditions and the interest rate.

To determine the financial terms of the credit to be granted (the interest rate on the loan, insurance conditions and required guarantee), the bank assesses your "risk."

The lower the risk – i.e. the more likely the loan will be reimbursed with no complications – the more likely the bank will be to offer you favorable financial conditions.

Risk assessment is based on five key criteria.

1. Your personal down payment

Significant upfront capital increases the chances of your application being accepted. In other words, if you buy a property worth €150,000 with €50,000 (33%) paid from your savings, the banker finances only €100,000 and will probably offer you more favorable terms.

This favorable treatment is justified for three reasons:

1 A significant down payment shows your commitment to the real estate investment.
In addition, the availability of this personal contribution demonstrates your capacity to save.

2 The guarantee that the bank will take (lender's lien, mortgage or surety) is listed for €100,000 on a property worth €150,000. The bank may therefore consider itself properly covered. In case of financial difficulties, if the bank is forced to resell the property, its value would have to fall below €100,000 (a loss of more than 30% of its purchase value) for the bank to record a loss.

3 For the purchase of a primary residence, banks often expect the borrower to make a personal contribution of at least 10% of the purchase price excluding notary fees and guarantees. This personal capital contribution will be used to pay costs (notary fees, guarantee, etc.) related to the acquisition.

GOOD TO KNOW:
To describe project financing, banks often use the term "loan-to-value" (LTV), which describes the amount of the loan as a percentage of the total cost of the transaction, excluding notary fees and guarantees. A high LTV reduces the chances of receiving the loan.

The LTV criterion retained may vary depending on the age of the borrower. Banks will be less demanding for a young borrower beginning his career, considering that he has not yet had time to build up substantial savings; however, they will expect more from a person who has been working for many years.

Important Note that in special cases, for example for rental investments or loans to finance construction or renovation, banks may be willing to finance the entire operation.

You are committed to reimburse your mortgage Loan. Verify your ability to reimburse before committing.