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Since January 1, 2020, the National Bank has obliged private banking establishments to limit the loan ratio to 90%. They have the right to go beyond that for part of their loans (35% of credits intended for first-time buyers), but in practice, for several years, they have shown restraint in granting credits with a quota greater than 100%. In other words, to be lent money today and become an owner, you must have equity. Not only for the purchase of the property itself, but also for registration fees and notary fees.
As the share of the population able to put them on the table is decreasing, alternative solutions to traditional bank loans are increasingly popular. According to the Brussels Housing Fund, in 2022, the demand for mortgage loans submitted to the Fund increased by 40%, with a 20% increase in the number of files granted. In Brussels, this Fund offers mortgage loans reaching up to 120% of the amount of the property and can therefore cover ancillary costs. The loan can be spread over a period of 30 years, compared to 25 years for traditional bank loans. Rates have risen more slowly than those of the banks, which explains the success of the Fund last year, but they currently fluctuate between 3 and 4.5%. Note that the rate remains fixed but that for first-time buyers, the monthly payment can be progressive. Access to these credits obviously differs according to the applicant’s situation. The annual net taxable income of people who are single or in a single-parent situation must not exceed 66,942 euros. For other types of households, the maximum is 85,200 euros. In both cases, each dependent entails an increase of 5,000 euros. To be supported by the Housing Fund, you cannot own another property, must reside in Belgium, buy in the Brussels Region and fully occupy the home.
There is also a Housing Fund in Wallonia, but it is intended for households with at least three dependent children. Other profiles can request assistance from the Walloon Social Credit Company. Fixed-rate SWCS loans range from 5 to 30 years, while rates vary between 2.7 and 4.1%. The access conditions are quite similar to those of the Brussels Housing Fund, namely: being of legal age, being domiciled in Belgium, not owning real estate, having a net taxable income below 69,400 euros (+ 5,000 euros per person to charge). However, the value of the property, which must be in Wallonia, cannot exceed 277,000 euros, except in several areas of real estate pressure, such as Waterloo, Neupré, Arlon, Wavre… where it can reach 374,000 euros.
Help from a third party
There is also the possibility of assistance from a broker or a third party. “Imagine a couple, they both work as employees and together earn 3,900 eurostakes as an example Thomas Grosjean, an independent insurance and credit broker. They have a car loan and about 7,000 euros in savings, but have children, so they find it difficult to put aside. And they pay 950 euros in rent per month. It is easy to understand that with this, you can pay monthly installments to become a homeowner. The problem is that you have to pay notary fees. Since 2017, it is forbidden to take out a loan to pay these costs in the context of a real estate acquisition.”
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The profile posed, what are the solutions available to this couple? “Some companies offer parents a loan to pay their children’s notary fees. The credit in question will then be repaid by the children. A little tip: parents will not pay a loan in their name for ten years. We will rather wait for the value of the property to rise to a quota of 90%, via work for example, to refinance it. And then we include the loan from the parents. It can take three, four, five years, depending on what the children do to increase the value of the property.”
Second track, mortgage allocation. “You cannot make a loan for non-real estate purposes, unless you have a real estate guarantee. A person will therefore give the mortgage of one of his real estate assets for the benefit of another borrower. As a rule, it is always a parent-child relationship. If the notary fees represent for example 30,000 euros, this amount will be in the name of the children but allocated as a mortgage on the parents’ house.” This solution is particularly interesting if work makes it possible to increase the value of the dwelling. These renovations make it easier to refinance the property under better conditions later on. “The goal is to give a boost to children. If the parents do not have cash available to give them, they can put their property as collateral. And if the property is renovated, we’ll come back and lift the parents’ mortgage.”
Growing success
Last alternative raised by the credit expert, the use of a third party. “Either the person gives the equity, with a contract between the two parties. This is the case, for example, of a friend who lends money for notary fees. In this case, one must show that there is indebtedness and future repayment. The friend can also act as guarantor. It is then included in the mortgage loan, with economic interest. And becomes the owner of at least 25% of the property. Later, the couple can redeem their shares.”
These different operations, which avoid having to resort to banking institutions and their constraints, are, unsurprisingly, gaining in popularity. Thomas Grosjean also estimates that almost one out of two mortgage transactions between parents and children. “I have never had so many people come to discuss these alternative solutions than today. Word of mouth is growing. We first organize a borrowing capacity meeting, to see together what possibilities they have. I think it is essential to go see your broker beforehand to be certain that when you sign an offer, you are able to buy. Especially since I insist on the fact that brokers are free, because they are paid via the companies and their services.”
