Loan interest rates, insurance premiums, application fees, notary fees, penalties, etc. A lot of the costs are related to a home loan. Here are some tips to reduce the overall cost of a credit.
Properly negotiate ancillary costs to reduce the overall cost of home loan
As part of a home loan, knowing how to negotiate can help dramatically reduce the cost of the loan in question. With this in mind, 4 types of expenses related to home loan are to be looked at closely:
– The costs that arise from the loan interest rate: the lower the mortgage loan rate will be, the lower the overall cost of the home loan will be reduced.
– Loan insurance costs: Considerable, they vary from one lending institution to another. They may be calculated as a percentage in relation to the aggregate principal amount borrowed or capital outstanding, or a fixed amount per borrowed principal amount.
– Administrative expenses: also variable, they can be lump sum, percentage or zero.
– Guarantees : In the case of a mortgage or lender’s privilege, the notary’s fees shall be added to the borrower’s additional costs. For a deposit, the borrower must pay a deposit fee.
Competition between financial institutions
In order to find the cheapest home loan offer on the market, it is more than recommended that competition between different financial institutions be played out because the difference between the interest rates charged can be considerable. Besides this, it is important to carefully look after its borrower profile to attract banks and benefit from advantageous loan conditions. For this, the ideal is to put forward a low debt ratio which guarantees the borrower’s good ability to repay the loan and a high personal contribution. These factors will significantly increase the chances of getting a low loan interest rate. On the other hand, the use of the delegation of insurance also makes a significant saving on the expenses related to the insurance of loan. In the facts, This approach involves taking out loan insurance in a different institution than the loan bank. As regards guarantees, it is also advisable to opt for the least expensive option, taking into account the overall cost of the loan as well as the possibility of an early repayment which gives rise to penalties