With rising borrowing rates and cautious bank lending policies, the real estate sector is sinking into a crisis that is affecting many first-time buyers. It is becoming more and more difficult for them to get financing for their first real estate purchase.
Rising mortgage rates
Since December 2021, average 20-year borrowing rates have more than tripled to 3.25% in May. This sudden increase had a direct impact on the borrowing capacity of French households, jeopardizing their real estate projects.
Thus, the number of loans granted to households during the period from May 2022 to April 2023 decreased by 31.9% compared to the corresponding time period last year. Faced with this situation, the Ministry of Housing has decided to extend the term of the zero-rate loan (PTZ) until December 31, 2024, in order to support first-time buyers.
Delegated borrower insurance: a cost-cutting solution
To cope with these high rates, first-time buyers can opt for delegated borrower insurance, which can be up to 70% cheaper than traditional bank insurance. This solution allows you to reduce the total cost of the mortgage and obtain more favorable financing conditions.
How does delegated borrower insurance work?
Delegated borrower insurance consists of the borrower choosing insurance from an organization outside the mortgage granting bank. The guarantees offered by this insurance must be at least equivalent to those required by the bank.
- Benefits of delegated borrower insurance:
- Rates that are generally more competitive than those offered by banks;
- The coverage can be adjusted according to the borrower’s needs and situation;
- Possibility to change the insurer during the loan to benefit from better conditions.
Tips for a successful first real estate purchase
It is essential for first-time buyers to prepare well before starting a real estate project. Here are some tips to put the odds in your favor:
Determine your budget and priorities
Know your borrowing options before looking for real estate. This allows you to avoid frustration and to target your research more precisely. It is also important to determine its priorities, such as the location of the accommodation, areas and equipment.
Learn about assistive devices
A first-time buyer has the opportunity to benefit from several support schemes for the purchase of real estate. To optimize financing, it is recommended to find out about the following aids in advance:
- Zero-rate loan (PTZ): This is an interest-free loan granted to low-income households to finance part of their first real estate purchase;
- Action Logement loan: this loan is intended for employees of a private non-agricultural company with more than 10 employees to finance the purchase of a basic residence;
- Local support: Some local authorities offer special help to support home ownership.
Do not hesitate to play competition between banks to get the best financing conditions. For first-time buyers, the search can be long and indecisive. By informing yourself correctly, you will not give up and put all the possibilities on your side to succeed in buying your first property.
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