1. Just look at the interest rate: the nominal level trap
When you want to get a mortgage loan, the first thing you often look at is the interest rate offered by the bank. But just focus on this nominal rate it is a big mistake. The interest rate displayed by the bank does not represent the total cost of the loan.
Why can this expensive?
The stated rate does not take into account other people hidden fees which comes with a real estate loan. Among these costs, we found:
- AN application fees,
- AN warranty costs (mortgage, investment),
- There is a costborrower insurance.
All these costs are included in the sale Annual Percentage Rate (APR)which is a true indicator of the total cost of credit. By focusing on the nominal rate without looking at the APR you can therefore subscribe to an offer that looks attractive but could, in the end, cost you a lot more over the life of the loan.
How to avoid this mistake?
Always compare the APRand not just the nominal interest rate. The APR includes all additional costs and gives you a more realistic view of the total cost of your credit.
Effect of tax on credit
| Real estate loan of €200,000 over 20 years | Nominal rate: 1.5% | APR: 2.2% |
|---|---|---|
| Application fees | 1 000 € | Including |
| Borrower insurance costs | 20 000 € | Including |
| Total cost of credit | 235 000 € | 250 000 € |
As the table shows, the total cost Credit can be much higher than the stated rate suggests.
2. Don’t compare borrower insurance: huge loss of savings
When you take out a mortgage loan, the bank often offers its own borrower’s insurance. It’s quick and easy, but it’s often a choice much more expensive what you get by delegating insurance to another insurer.
Why it might cost you thousands of euros?
Lender’s insurance can represent up to a third of the total cost of your home loan. Many borrowers are unaware that they have the right to choose insurance different from the one offered by the bank, while it offers an equal guarantee. This option is called will of insuranceoften allowing you to get much more competitive prices.
How to avoid this mistake?
Compare borrower insurance as soon as you have a credit proposal. Use online comparators or use a broker to get a more advantageous offer. By choosing external insurance, you could save several thousand euros during the loan period.
Julie, 32, has saved more 10 000 € credited €250,000 by choosing an insurance agency, thus paying an annual contribution of 0.15% instead of the 0.30% offered by his bank.
3. Waiver of prepayment clauses: a costly penalty
One of the most common mistakes is not paying attention to it early repayment contracts included in your contract. If you want to repay your loan earlier, either because you have resold your property, or because you have cashed in, some banks claim penalties.
Why can this cost a lot?
AN prepayment penalties can sum a 6 months with interest or to 3% of the remaining capital is payablewhich could represent a significant amount, especially if you pay back at the beginning of the loan. This can greatly reduce the benefit of paying in advance and reduce your savings.
How to avoid this mistake?
When negotiating your loan, check the early repayment conditions and try to reconcile with them. Some banks will agree to remove or reduce them if you request it. If you know that you will have the opportunity to pay back faster, it is necessary to pay attention to this detail.
Protect yourself from costly mistakes
By avoiding these three common mistakes when taking out a home loan, you can save money. thousands of euros. Be sure to compare rates including the APR, explore options for borrower insurance, and understand prepayment clauses to avoid penalties.
With these tips, you’ll have all the cards at hand to maximize your real estate credit and make smart investments.
2024-10-20 19:35:00
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