Need a mortgage? With a mortgage you can borrow money from the bank for a real estate project; buy a house, apartment or building plot or renovate a house.
What is a mortgage loan?
A mortgage is a term that is popularly used to denote a loan with real estate as collateral. This loan is officially called a mortgage.
What is a mortgage loan?
The bank needs a guarantee to ensure that you actually repay the loan. That is why the bank asks you to take out a mortgage on your home.
A mortgage therefore means that you are obliged to pledge the property as part of the mortgage loan. If you are no longer able to repay your current loan, the lender has the right to seize your property in order to recover the money it lent you in this way.
When you take out a mortgage loan, you have to repay the monthly installments (as with any other loan) every month. Your bank or other financial institution that lends you this money does not want to take risks. If the bank gives you a loan, it takes your income into account. But if one of your sources of income dries up (for example, you lose your job, you are in a divorce …) and you are no longer able to pay your installments, it is the guarantee that enables the bank to to cover costs. He will then be able to put the property up for sale in order to get the money borrowed back, including fines.
What is the mortgaged property?
As a general rule, the mortgaged property is the good for which the loan was taken out. However, you can offer your bank the option to mortgage other properties. The condition for this is that you must of course own the property and its value must be able to cover the value of the loan.
It does not necessarily have to be a real estate, it can also be a boat, an old-timer or some other valuable asset.
Where should the mortgage loan be registered?
The mortgage loan is officially registered in the Mortgage Register. This agency, managed by the Belgian State, keeps a register of your mortgage, indicating the value it represents.
Why would you choose a mortgage?
The purchase of a home is a big step in everyone’s life and connects you for many years. If you want to buy a home in a neighborhood where prices are constantly rising, a mortgage is a good solution. This way you avoid having to wait too long for the purchase of your property while prices keep rising.
How does a mortgage loan actually work?
A mortgage is signed at the notary and is done by a signed deed. Before you buy the house, your credit institution pays the purchase amount to your notary. Once the purchase contract is signed, the notary pays the purchase of your property to the previous owner.
Make sure you provide the necessary funds to pay the notary’s fees and expenses, as they usually have to be paid from your own resources. We also call this the notary fees.
When it comes to a new build, your lender pays you the necessary money, if and when you submit invoices from suppliers and service providers. In other words, the credit institution pays in installments.
Who can take out a mortgage loan?
You must be at least 18 years old to take out a mortgage. Before you sign up, make an inventory of your earnings and estimate the amount of the monthly payment you will need to repay.
Take your wages, income from real estate, annuities or other income and add them up. Compare them to your fixed costs: rent, water, electricity, telephone, internet, etc., as well as any outstanding loans. The monthly payment you must make must not exceed a third of your monthly income. In addition, your borrowing capacity will be reduced if you already have other outstanding loans.
In any case, your bank will make this calculation. She will ask you to account for your income and will also view your savings account. In addition to the amount you have in one or more savings accounts, the lender takes into account your lifestyle. It is reassuring if you have savings on the side and it will be suspicious if you have never put a penny aside.
What are the additional costs of a mortgage loan (costs for the notary)?
The costs of a mortgage loan are not insignificant. Everything goes through a notary, the signing of the loan and the purchase. The notary charges his own fee, but also acts as a tax collector for the state, as he collects the taxes paid to him.
It is therefore extremely important that you set aside the necessary amounts to be able to pay these fees.
Examination, preparation and administrative formalities
Before signing your mortgage deed, the notary has to perform certain investigation and administrative formalities. These are urban searches and requests for certificates.
It is important that you discuss this with the notary in advance, because while some are mandatory, others are optional, so the cost of these rates differs per notary.
Mortgage costs are calculated based on your specific file. Take into account 0.3% of the value of the applied for mortgage credit and accessories (estimated at 10% of the credit).
For example, there is the conservation fee
This is a fee for the mortgage custodian that ensures that no other mortgages are taken out on the property. They amount to € 250 for a loan of less than € 272,727 and € 950 for loans above that amount.
Costs for the attachments of the mortgage loan
The compensation for the annexes to the mortgage deed is € 100.
The cost of the registration
Registration fees represent 1% of the value of the mortgage loan and accessories, and are usually estimated at 10% of the loan.
Writing rights used to be called stamp duty. They amount to 50 dollars excluding VAT, ie 60.50 dollars including 21% VAT.
The notary fees
Notary fees, which are subject to VAT, are determined on a statutory basis. A specific scale is applied here, depending on whether it is a loan or a credit facility that makes it possible to borrow an amount. The higher the amount, the lower the percentage.
Since this expense is 100% dependent on the amount of your mortgage loan, the amount will be the same for all notaries.
Are there any upfront costs to a mortgage loan?
The lender charges an administration fee. This is capped by law at $ 500 and for a bridging loan without a mortgage at $ 300.
The lender should check whether the value of your property will be sufficient should it be put up for sale due to default. So she will have your home valued by her own experts and will charge you the appraisal costs.
What is an outstanding balance insurance?
It is important to always take out outstanding balance insurance with a mortgage. If one of the partners dies before the end of the mortgage loan, the surviving partner – as well as the heirs – are protected and they do not have to repay the part owed by the deceased.
With this insurance you can get a more attractive interest rate. It is therefore important to always take out outstanding balance insurance with a mortgage.
Do you need a personal contribution to take out a mortgage?
With a mortgage, a personal contribution is not mandatory, but it is much more difficult to take out a mortgage without using part of your savings. The personal contribution can come from any source: savings, sale of a house, inheritance … It already allows you to finance part of your real estate project and therefore have to borrow a smaller amount.
Usually financial institutions ask you for a minimum contribution of 10% of the total amount of your loan. In reality, 30% is the most common share. The higher your personal contribution, the easier it is for you to take out a mortgage loan.
A personal contribution also makes it easier to negotiate with the bank.
When your personal contribution is significant, you are in a strong position to negotiate interest rates and terms with the lender.
However, if you have savings, it is advisable not to use all this for your personal contribution, but also to keep part of it. Unexpected things can always happen in life and your savings will enable you to overcome difficult times and give you time to recover from, for example, economic crises.
On what does the lender base the amount of the loan?
The bank first calculates your savings capacity before considering whether you will provide a mortgage loan.
It bases itself on four elements before approving the mortgage:
- the valuation of the property by an expert, whether it is a purchase of land, a renovation or a construction project;
- your personal contribution: savings, inheritance, sale of other real estate (not necessarily real estate), etc;
- the guarantees and securities you can give;
- your ability to repay.
What is the term of a mortgage?
How long does a mortgage loan last? As with any loan, the term of the mortgage depends on a number of factors, but of course your ability to repay is not everything. Your age and family situation should also be taken into account.
The bank not only looks at the figures when you borrow, but also looks ahead to the future. A mortgage can have a term of 10 or 20 years. So you have to take into account any future events.
You may have fewer options to repay when you retire because your income will drop. If you have children, plan for when they go to school, which will put extra strain on your budget.
On the other hand, in the future you will also have contributions that will facilitate your repayments, for example if you have a previous debt that will disappear soon. If you get an inheritance or if your professional situation changes, for example by taking over the family business …
The longer the term of the loan, the more you can borrow, because the repayments are spread over a longer period and the amounts are smaller. On the other hand, the total amount to be repaid will be higher as it also includes the interest.
Is it possible to review the terms of a fixed rate mortgage?
If you took out a loan at a time when interest rates were high and subsequently declined significantly, it is not possible to revise the interest, which by definition is fixed. On the other hand, it is possible to pay off your first loan early, in order to take out a new mortgage on the outstanding balance.
It is not always worth doing this and your bank may also prevent you from doing this. Each case is different and you will have to make proportional calculations. If you have already paid off most of the interest concentrated at the beginning of the loan, you only have capital left to pay off. In this case, the drop in interest rates would no longer affect your monthly payment, especially since you have to consider file fees and other costs associated with the transaction. Always consider whether you want to revise the conditions of your mortgage.
What is a mortgage with principal repayment?
Mortgage credit with capital amortization is most commonly used. It consists of writing off the borrowed amounts, ie the monthly repayment of part of the capital, but also of the interest on the amount.
Interest is usually proportionately more important than the amount allocated to capital at the start of the loan. Over time, interest decreases for the benefit of capital.
You can also request that your monthly payments be degressive over time. In this case, you always repay the same amount corresponding to the capital. As interest decreases over time, your monthly payment will automatically decrease.
What is an amortization mortgage?
The Repayment Plan Mortgage is another solution that works with a monthly amount called a “premium” that allows you to repay the full amount borrowed at the end of the contract. It comes from a professional activity, with a pension capital, formed by your employer, or from a life insurance policy.
During the term of the loan, you pay the interest on the loan amount, which is added to the premium.
The life insurance contract can be of type 21 or 23.
Branch 21 “life insurance is better known as” savings insurance “. It has a guaranteed return, which may be supplemented by a profit sharing, which is not guaranteed but depends on the performance of the insurer.
Since the repayment of the premiums is guaranteed from the beginning, regular payment ensures that your loan amount will be fully repaid at the end of the contract and that your credit institution will get the full amount back.
Branch 23 “life insurance is linked to an investment fund consisting of assets. The return is not guaranteed, but depends on the performance of one or more investment funds. Taking into account this fluctuation, the value of the fund varies and you do not have the guarantee that the total borrowed capital at the end of the contract is repaid.
What is the purpose of a bridging loan?
You can take out a bridging loan as a kind of short-term mortgage. It serves as a bridge between the sale of one property and the purchase of another. For a limited period of time, you need liquidity to make that bridge.
The bridging loan cannot exceed three years. The interest rate is fixed. This means that your credit institution makes a certain amount available to you. It is used to acquire your property pending the sale of the other.
Fixed or variable rate credit, how to choose?
You can borrow at a fixed or variable rate and it is important that you understand things, because the risks and consequences are not the same. Fixed or variable interest? How is that exactly?
Fixed rate credit
When you take out a fixed-rate loan, you will not be faced with surprises, good or bad, you are committed to a fixed-rate that will not change during the term of the loan. This is the surest option.
With a fixed-income loan you are assured of a stable monthly payment. The relevance of choosing this type of loan depends on the current economic situation. If you borrow at a time when rates are low, you don’t have to worry about any increases. On the other hand, if the interest at the time you take out the loan is high, and if it falls at a later time in the term, your monthly payment will not fall.
Variable rate credit
As the name implies, the variable rate can vary both up and down.
If you opt for a variable rate loan, there are many subtleties that will affect the evolution of your rate. The formulas that allow the lender to change its rate are predetermined.
The changes can be linear. For example, a 1/1/1 formula means that your rate is reviewed every year; a 3/3/3 formula means a change every three years, and so on.
Changes can fluctuate. For example the 10/5/5 or 20/5/5 formula, or the 25/5 formula, with only one change.
On any due date, if your rate is revised, your monthly payment may fluctuate up or down. Not all formulas are offered by all organizations.
What is the maximum rate of a variable rate mortgage?
The maximum rate
With a variable rate credit, you can be protected by the maximum rate, also known as secured interest. The base rate of a maximum credit is often slightly higher than a conventional variable rate credit, but you are guaranteed a more stable rate.
A bandwidth is determined when the loan is signed, so that you benefit from a framework that you receive when rates go up, thanks to the high bandwidth. The low bandwidth is a guarantee for the bank, in case the market collapses.
The upper limit is attached to the loan when the variable rate loan is signed. Banks generally offer rates with a maximum of 1, 2 or 3 points.
Advantages and disadvantages of the variable rate loan
It is clear that the floating rate is riskier than the fixed rate loan. However, you can opt for a variable interest loan to limit your risks.
You must study the market conditions when you take out the loan, but you will never be able to accurately predict where the market will be in 5, 10 or 15 years.
Variable interest loans offer a better interest rate than fixed interest at the beginning of the contract. If the rates are high at the time of signing, it is in your interest to choose this option. If the market goes down, you have a clear financial advantage because your monthly payments will go down as well.
Unfortunately, if interest rates rise, your monthly payment will increase.
Can I take out my current mortgage to buy a new home?
Whatever the reason, you can decide to resell your property under mortgage. You then have two options: transfer your loan to your new home, or liquidate your old loan and then open a new one.
Transfer of your mortgage
If you have another house in your sights, you can transfer your mortgage to your new home and that can be an interesting solution.
- the costs of transferring your mortgage are less than the costs of writing it off;
- you avoid the costs of opening a new mortgage;
- your credit remains, no compensation will be paid to the bank;
- the terms of your old credit remain in effect;
- you keep your tax benefits.
However, you will always have to pay file and expertise costs.
Pay off your mortgage to take out a new one
Sometimes it is in your interest to fully repay your loan before taking out a new one. This is possible when economic conditions have changed and the rates offered have become much more attractive.
However, do not forget to mention the application and appraisal costs.
Can a mortgage be repaid before the end of the term?
You must repay the balance of your mortgage loan and an amount corresponding to the relocation fee. This is a flat-rate allowance that allows your lender to cover part of the interest he no longer receives on your credit.
What are the rules for a mortgage loan?
Banks are subject to the rules of the FSMA. This is the Authority for Financial Services and Markets.