FAQ

FAQ Mortgage loans

• What is the purpose of home loan insurance?
• Can I borrow without any personal contribution?
• What is a mortgage?
• What is the difference between a fixed and a variable rate?
• What is loan refinancing?
• What is the notary’s role?
• What criteria will the bank apply to examine and assess my application?
• How can I take out a loan at CPE?
• What is the ARP?
• Why regroup my loans?
• Why choose a credit broker?

What is the purpose of home loan insurance?

Taking out a home loan is a commitment over 10, 15, 20 and at times even more years.  It is an important decision in life.  The higher the amount of the loan and the longer its term, the greater the risks (death, occupational accident, job loss, etc.).  A loan insurance is an efficient means of protection and provides real security for the borrower and his family.  If the borrower should die or become disabled, the insurer will assume all or part of the outstanding monthly payments.

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 Can I borrow without any personal contribution?

Yes, it is possible to borrow without any personal contribution, i.e. without contributing any money to the operation.  The Comptoir d’escompte Européen can give you a loan of 125% that could include all the charges relating to the purchase without penalising you in terms of the rate.

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What is a mortgage?

A mortgage is a guarantee that enables the bank to resell the property you acquired if you are unable to make your monthly payments.  It must be recorded by notarial deed.  If you sell the property before the expiry of the mortgage, you will have to pay the mortgage discharge expenses.

If you have a choice, a mortgage is advised against for small amounts because of its cost, rigidity and administrative formalities.
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What is the difference between a fixed and a variable rate?

The rate may be fixed or variable.

In the former case, the monthly payments will be unchanging for the entire term of the loan.  In the second case, the interest rate, and therefore the monthly payments, will be subject to upward or downward variations.  These variations depend on a reference index.  To protect their customers against excessively high interest rate rises, banks have developed other types of variable rates, known as capped variable rates:  the rate may not exceed a cap set upon signing the loan agreement.

Remark:  there are many formulas for securing the variable rates.  Your preference here must be linked to your degree of risk acceptance:

•     Fixed rates are steady, but the corresponding monthly payments are slightly higher by comparison;
•     Variable rates entail lower monthly payments when the loan is taking out, but that can change over the years.
•     Capped revisable rates provide intermediate initial monthly payments and risk level.
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What is loan refinancing?

Refinancing a loan consists of reimbursing a loan early, and at the same time taking out another loan at a lower rate to benefit from a drop in interest rates. Refinancing concerns mainly fixed rate loans, as variable rates by definition enable the borrower to benefit from drops in interest rates. To refinance a fixed rate loan, you will have to pay early reimbursement penalties, which may amount to as much as 3% of the capital remaining to be reimbursed. This solution makes sense if interest rates have dropped considerably or if your financial situation has improved substantially since you took out the loan.
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What criteria will the bank apply to examine and assess my application?

The bank will try to determine your “risk profile,” i.e. it will try to assess your capacity to reimburse the loan, but also the probability that it will not be reimbursed.  Of course, the greater the risk that your application entails, the higher the proposed rate will be.  Here are some of the criteria that will come into play in examining your application:

•    Level and regularity of your income;
•    Occupational stability:  it will be very difficult to get a loan if you are in a trial period or if your job is deemed very unstable;
•    Amount of personal contribution;
•    Number of dependents;
•    Level of debt.  Your debt level will be limited to a percentage between 33% and 50% of your income.  
•    Marital status.

The bank will more generally assess your current and future revenues and expenditures to determine your capacity to reimburse the loan.
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What is the notary’s role?

Every real estate transaction must be conducted and recorded by a notary.  The notary will intervene both for the sale of an existing piece of property as well as for the construction of a new dwelling. He intervenes on many fronts:

•    The notary is instructed to draw up the provisional contract of sale and to gather all the administrative documents required for the transaction (certificate of town planning, extract from the land registry, etc.).  If the purchase requires a mortgage or a privilege inscription for the fund lender, he must see to the administrative formalities with the registrar of mortgages and the financial institutions. The notary advances the administrative charges on behalf of his client, who reimburses him subsequently.
•    The notary must also verify the different items of legal and administrative information so as to avoid any subsequent problem.  For example, he must verify whether the property is not mortgaged, if there is no pre-emptive right on a plot of land, etc.
•    The notary is responsible for drawing up the final deed of sale and registering the transaction.  He also sees to the land registration formalities.

Beyond these areas of intervention, the notary also plays the role of a counsel.  He may play an intermediary role in a transaction and negotiate a sale on behalf of his client. At times he proceeds to have the property appraised.  The notary is responsible for providing absolute security for the buyer and is the real guarantor of the real estate transaction.  He must see to the smooth completion of the transaction and he may be held liable for any drafting errors or failures in his duties to advise.
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How can I take out a loan at CPE?

It is very simple:  Either on the Internet by clicking on “application online” or by telephoning us at the numbers indicated on our website, depending on the region in which you live. Your application will then be processed directly and you will get an answer within a day.  We nonetheless advise you to give preference to an application online, because we then have all the elements to decide about the loan as promptly as possible.
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What is the ARP?

The ARP is the annual rate percentage and is used to calculate the overall cost of a loan, inclusive of the administrative charges.  The formula for calculating the monthly payment to reimburse a loan:  (A x Amount borrowed) / B • A = (1 + ARP) 1/12 - 1 • B = 1 - (1 / (1 + ARP) T/12) • T = Term of the loan
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Why regroup my loans?

Loan regrouping is a solution for reducing the overall monthly reimbursement of all your outstanding loans.  The principle is to regroup all the loans into one loan only and to chart a new, longer reimbursement plan at a rate that can be lower.
The debt will not diminish and the credit cost will be higher, but the monthly payments will be lower.
The formula is interesting if the outstanding loans are no longer sustainable, for it provides a way out of a difficult situation.
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Why choose a credit broker?

A credit broker is a specialist in loans:

•    He compares the best offers from several banks;
•    He examines the different credit formulas and advises you in accordance with your situation.  He is the intermediary between the bank and yourself.