The mortgage is today a complex whole, the cost of which does not depend solely on the rate offered by the bank. In addition to a competitive rate, it is a question of looking for a
suitable financing solution. NH Financing proposes specific formulas to finalize her real estate project at a lower cost.
NH Financing offers winning formulas for the borrower
Mixed rate loan
This type of loan is fixed for a given period (5, 7, 10 or 15 years), then revisable afterwards, most often capped 2. The customer then benefits from a lower rate which allows him to increase its borrowing capacity. This loan avoids the risk of a rise in the interest rate during the first years, years during which the interest to be repaid is the highest. This formula is very interesting for first-time buyers who have a high probability of selling their property before 7 years.
Some banks offer a so-called “scalable” loan that is well fixed rate throughout the life of the loan, but which is accompanied by an automatic maturity adjustment of 1% per annum. As a result, the initial monthly payment, from which the debt ratio is calculated, is lower, which makes it possible to borrow more.
There is the possibility in some banks to divide the loan into two lines of credit to lower the average rate. For example, for a loan of € 180,000 over 20 years, the bank has a 10-year loan line and a 20-year line. Both loans are smoothed in order to maintain a constant monthly payment over the entire term of the loan. The main advantage is to lower the average rate (since the 10-year rate will be lower than over 20 years). The other significant benefit is to lower the total cost of insurance since a portion of the loan will be provided over a shorter period.
Example: For a classic loan of 180,000 euros over 20 years at a fixed rate of 3.95%
– Monthly payment excluding insurance: 1086.03 euros
– Monthly insurance including: 1123,53 euros
– Total cost of interest: 89 647,20 euros
With a tiered loan of € 180,000 over 20 years: long loan of € 107,100 over 20 years at 3.95% and short loan of € 72,900 over 10 years at 3.30%
– Monthly payment excluding insurance: 1066.61 euros
– Monthly insurance including: 1104,10 euros
– Total cost of interest: € 84,985.20
Savings of 4662 € on the total cost is an average rate of 3.74% over 20 years instead of 3.95%.