Are you considering taking out a home loan? Depending on the nature of your project, the type of housing targeted and your situation (personal, professional, financial), you will be able to choose between different types of loans. Indeed: there is not “one” housing loan, but a multitude of loans, adapted to the status and needs of the borrower. This section of the practical guide to mortgage credit will allow you to choose the best type of loan – as well as the ideal rate – to carry out your transaction.
Choose your type of home loan
What type of home loan to choose? Banks (and other lending institutions) offer several options for taking out a home loan. This differs according to many criteria specific to the borrower:
In the family of classic housing loans, the best known is undoubtedly the depreciable loan . The monthly payment paid by the borrower is divided into two (capital and interest). It allows him to amortize part of the capital obtained (hence the term “depreciable”) while paying the interest of the house loan as and when. The credit is settled on maturity, after a number of years specified in advance.
This type of home loan can take several forms, in particular that of the smoothed loan (or with stages) . This formula arranges the monthly payments of the house loan according to other parallel loans, so as to maintain a constant reasonable debt ratio.
The bridging loan intervenes only in the case of a crossover between resale and acquisition. This type of home loan allows you to buy a new property without having to wait to sell the previous one. The capital is repaid when the borrower has received the fruits of his sale.
As for the credit in fine , as its name suggests, it consists of repaying the entire capital at maturity. Throughout the term of the loan, the monthly payments only include interest and borrower insurance costs . It is the savings that will make it possible to settle the loan at the end of the operation. The interest of this arrangement is that it is supported by low monthly payments and therefore weighs little on debt. It is ideal for rental investment.
Additional aid to housing credit
These conventional loans can be backed by so-called .an aid to home ownership which aims to simplify the first acquisition of a principal residence. It supplements an existing housing loan.
The social accession loan , or PAS, is a housing loan granted by certain banking establishments in collaboration with the State. Depending on several criteria, it is possible in this way to finance all or part of the total cost of a principal residence, over a maximum of 30 years. In the same vein, the approved loan makes it possible to cover up to 100% of the sum necessary for the acquisition of a main residence, except that it is not subject to conditions of resources and that it opens the right to housing allowance.
In addition, there is a very specific type of home loan, set up by certain communities. This is the case of the Paris housing loan , reserved for inhabitants of the capital wishing to buy in their city. Or even “local authority” credit , through which a community itself grants a loan for the acquisition of new or old housing.
Other types of loans
Finally, let us mention a few singular (and rarer) forms of mortgages. For example, real estate leasing , which only concerns property for professional use: it is the bank that acquires the property and makes it available to its client, against payment of rent and a term purchase option.
Another example: the pension fund loan, thanks to which an employee or an executive can get help for the financing of his main residence by his pension fund, against a minimum contribution period. And only for small sums.
Choose your borrowing rate for a home loan
Beyond the different types of loans available, another important point of the housing loan must also be defined: the rate. Let’s go into detail.
Fixed rate housing loan
The interest rate, fixed when the home loan is set up, does not change throughout the duration of the loan. So that the borrower knows in advance the amount of the monthly payments to come as well as the total cost of the loan, the rate remaining fixed including if he chooses to modulate the duration of the loan or the amount of the payments. We also speak of APR rate, for “annual effective annual rate”.
Note that the fixed rate is most often chosen for a housing loan (at least when it comes to financing a main residence).
The change in the rate is applied at regular intervals, according to a schedule fixed in advance, for example every 3 or 6 months. The only thing that remains unchanged is the bank’s margin applied directly to the interest rate.
This type of rate has advantages and a major disadvantage. It allows you to benefit from downward changes in the borrowing rate, without having to renegotiate. In addition, the base interest rate is often more attractive than in the case of a fixed rate. However, depending on the market, this solution can be costly: if the rate rises significantly over a long period, the borrower will end up paying much more for their home loan and/or increasing their loan term.
This ceiling can relate to the rate (with more or less X points of variation) or to the duration of the housing loan (with more or less X years of oscillation). Or even a mixture of the two possibilities. Even if the total cost of the mortgage is not known in advance, the fact remains that this type of rate allows you to take advantage of market conditions without taking too many risks.