20 tips for the cheapest housing loan 2020
Anyone taking out a home loan today can enjoy favorable conditions. But how do you stipulate the best and cheapest housing loan?
1. Variable or fixed interest?
To get started, it is important to determine which type of interest rate suits you best. With a home loan you can choose between a variable and a fixed interest rate. A variable interest rate is especially interesting if the interest rates are high. This is because there is a good chance that the interest rate will fall. If the interest rate is on the back burner, it is advisable to click the interest rate again for the entire duration of the loan. This way you can be sure that the monthly repayments will remain unchanged with an interest rate change.
2. What to pay attention to with a variable interest rate?
Because of the low interest rates, people often opt for long fixed-interest periods. However, if you expect the interest rate to be even lower, the choice for a variable interest rate may be a consideration. Anyone who chooses a variable interest must take all kinds of things into account. For example, you have to look at how much the interest can rise or fall. The banks are required to communicate that. The potential interest rate rise or fall is summarized in ‘the cap’. Anyone who receives a cap of 2 percent, for example, knows that the rate can rise or fall by a maximum of 2 percent with the next interest rate adjustment. The interest rate may double up to a maximum. Also view when the interest rate is being adjusted. Is that annual or every five years?
3. Select the correct duration
The longer the duration of a loan, the higher the interest rate. The difference between a 20-year loan and a 25-year loan can quickly add up to dozens of basis points. It is therefore important to make a trade-off between the duration and the monthly repayments. A shorter term leads to a lower interest rate, but does have an upward effect on the monthly installments. Match the term to the monthly disposable income.
4. Play benches against each other
Those who visit only one bank in their search for the best home loan rarely or never have the best rate on the market. Some banks are willing to lower the rate if a competitor comes across with more favorable conditions. Therefore always go armed with a rate from the competitor to the lender. In this way you increase the chance that you will receive a better proposal.
5. Don’t forget the conditions precedent
Those who need sufficient time to compare banks can ask the seller to include conditions precedent in the provisional deed of sale, including the reservation of financing. The more time you have to compare, the greater the chance that you can negotiate better conditions.
6. Note the validity of the quotation
Once you have received a lower interest rate at a bank, it is recommended that you also obtain information from other banks. The validity of the interest rate offered is usually of short duration.
7. No time? Request online mortgage quotes!
Anyone who does not have time to visit all banks can turn to an independent broker. He or she will look for the most affordable loan on the market for you. It is easier to start your search on Bankshopper; you can submit your application in a few minutes. The selected banks are informed through us and issue an interest rate proposal. Applying has never been easier!
8. Take out a home loan at the end or beginning of the year
Banks must meet certain objectives every year. It happens that certain offices did not sell enough mortgage loans during the year. During the last months of the year, they will switch gear up to reach their target figures. They can, for example, do this by temporarily reducing rates. The same applies to the start of the new year: unpacking with lower rates for the same reason: turnover speed and market share.
9. Also look at the other costs
Since 1 April 2017, banks have been required to communicate the annual percentage rate (APR) of a loan if someone applies for a home loan. That APR includes the file costs and the premium for the fire and debt balance insurance. There is a chance that the APR is lower with one lender than with another, despite a higher interest rate. For example, it may be that that one lender is offering cheaper insurance.
10. Create a piggy bank for the extra costs
It is not possible to borrow more than 100 percent of the market value of a home. That means that you have to finance the extra costs yourself, such as registration fees and notary fees. Those who cannot pay these costs themselves can take out a personal loan if necessary. That loan is more expensive than a home loan; the interest rate can be as high as 10 percent.
11. Rarely a good idea to take out insurance elsewhere
It is not mandatory in our country to take out the fire or debt balance insurance with the mortgage provider. People are free to purchase those products elsewhere. Often the mortgage provider charges a surcharge on the interest. Many lenders give a discount if you purchase by-products from them, such as a fire insurance policy.
12. See if the banks work with a mortgage mandate
The banks want to be sure that they will get their money back in the absence of the monthly repayment. The banks limit their risk with a mortgage registration. Sometimes the banks are willing to work with a mortgage mandate. In that case, the bank will only place a mortgage on the home if you do not pay off your loan correctly. Thanks to a mortgage mandate, registration fees, notary fees and deed costs, among other things, are falling.
13. Watch out for the potential costs of a mortgage mandate
A mortgage mandate at first sight seems interesting for the borrower, as long as you repay your home loan correctly. In the event of non-payment, the banks are free to convert a mortgage mandate into a mortgage registration. The borrower must then pay for the costs, which are higher than with a mortgage registration.
14. Financing part of the home yourself
The National Bank of Belgium (NBB) has repeatedly criticized the banks because they have been granting housing loans too quickly in recent years. That is why the regulator obliges the banks to set up a capital buffer for mortgage risks. This translates into, for example, tariff increases if, for example, you borrow more than 90 percent of the market value of the home. Other banks then grant an additional discount if, for example, you borrow less than 80 percent. In short: the more money you can put on the table yourself, the greater the chance that you can negotiate a lower rate.
15. Provide a complete file
Good preparation is important. Banks can calculate a correct rate faster if you can submit the required documents. This includes the provisional deed of purchase, the payslips and other proofs of income. If you do not have the necessary documents, the banks make an estimate. This makes it easier to compare home loans.
16. Compare the rates in advance
Before you visit a bank, it is definitely worth making simulations. The majority of banks now offer that possibility on their site. Thanks to these simulations you know in any case what the target rates of the lenders are. If you want to compare several banks at the same time, you can visit a comparison site such as Bankshopper.be. It will soon be much easier to compare housing loans on our site. Visit our site regularly to stay informed of any changes.
17. Don’t forget the internet banks
Many people are inclined to turn to their trusted bank to take out a home loan. That is not always a good idea. If you look beyond the traditional players, you can pick up attractive rates. For example, internet banks are usually among the cheaper players on the market. If you want, you can use the internet bank rate to get a lower rate from one of the traditional players. Hello Bank! and Keytrade Bank are the largest internet banks in our country.
18. Pay premium balance insurance in one go
With the majority of the banks you have the option of spreading the debt balance insurance over time. You usually pay that premium for two thirds of the term of the loan. Although it is also possible to pay the premium immediately at the start of your home loan. The majority of banks grant a discount if you do that. This discount can amount to hundreds of euros.
19. Take out free ‘Guaranteed Living’ insurance
Anyone taking out a loan for buying, building or renovating a home can take out free insurance with the Flemish government against loss of income due to sudden unemployment or incapacity for work. This insurance is free and has a term of ten years. Only people who have borrowed at least 50,000 euros can claim a ‘Guaranteed Living’ insurance. Moreover, the property may not be worth more than 320,000 euros. On the site of the Flemish government you will find all information about the free insurance.
also read: how to get personal loan approval with bad credit