With the recent rise in rates, access to real estate credit is becoming more and more difficult for borrowers. Banks’ requirements have increased, asking for higher savings, personal contributions, and income than a year ago. Faced with the increase in loan refusals and the deterioration of financing conditions, the “certificate of financial feasibility” is becoming a valuable asset for buyers. Has the Certificate of Feasibility become the new holy grail for borrowers?
Summary :
Explosion of loan refusals: the crucial role of the feasibility certificate
The year 2022 was a turning point for the home loan industry. Until June, things seemed to be going rather well with less than 10% of applications refused. In any case according to the feedback from courtiers CAFPI. However, a spectacular increase was recorded in July with 17% of files refused.
In this context, the “feasibility certificate” also called “financing certificate” takes on increased importance for borrowers. This critical month raises questions about approval criteria and the usefulness of having a reliable “certificate of feasibility” before committing to a loan.
The introduction of the monthly usury rate could be one of the factors influencing this increase in refusals. In this context, the certificate of feasibility can serve as an impartial judge of the financial health and credibility of the borrower.
Note that after the July peak, the share of refused files returned to more conventional levels, stabilizing around 11%. Although this is an improvement, there is no doubt about the added value of this document. Especially when financial institutions are becoming more and more cautious.
Rising interest rates: what is the impact on the solvency of borrowers?
Since the summer of 2022, a rapid rise in interest rates has shaken up the real estate loan market. This transforms many project leaders into insolvent customers.
> Consult our article on: “Real estate credit: the 4% milestone reached!”
Indeed, the financial market has not been kind to aspiring owners. Bank rates over 25 years have now reached levels ranging from 3.5% for borrowers with the highest incomes to 5% for lower-income households. In such an environment, a well-documented feasibility certificate becomes essential to assess the feasibility of a real estate project.
The Real Cost of Rising Interest Rates
Borrowing at 5% rather than 3.5% is not just a matter of a few percentage points. According to a simulation carried out by CAFPI, for a loan of €250,000, the difference between these rates results in a 16% reduction in borrowing capacity. Such a sum can destroy a life project!
-16% less borrowing capacity, a significant amount!
The certificate of feasibility: a lifeline?
In a time marked by instability and uncertainty, having a certificate of feasibility can set you apart with lenders. This document can be key to showing banks that, despite higher interest rates, you remain a viable and trustworthy borrower. In today’s age, where every percentage point counts, this certificate is not just a formality, but a necessity.
> Consult our article on: “Real estate credit: how to stop the phenomenon of eviction?”
Why is the certificate of feasibility essential?
This document has become essential for anyone seriously considering a real estate purchase. It gives you a better idea of the available budget. But it is also a guarantee of seriousness to reassure real estate agents and sellers.
A financial map for the buyer
On the one hand, the certificate of feasibility provides potential buyers with a clear view of their financial margin. This helps them target and refine their real estate search. This way, they avoid wasting time on out-of-budget items. In other words, this document acts as a financial compass, guiding buyers through the maze of the real estate market.
An increasingly required condition for visiting a property
Furthermore, this financing certificate is most often requested before even scheduling a property visit. In fact, it serves to reassure sellers and real estate agents that you are serious. But, it also demonstrates that you have done your homework when it comes to financial preparation.
Financial institutions and brokers, such as CAFPI, provide this certificate. It assesses the borrowing capacity on the basis of the applicant’s income, savings and personal contribution. According to Caroline Arnould, Managing Director of CAFPI, their certificate of feasibility is proof of solvency that their clients can proudly present during property visits.
Now, the certificate of feasibility is an asset that you cannot afford to ignore. In addition to facilitating your dealings with agents and sellers, it also gives you a head start in your search for the ideal property. In an age where every detail counts, this document could well be the key that opens the doors to your future property.
2023-09-13 18:08:42
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