Do you have little or very little savings but still want to buy a property? Have you surveyed your bank, which tells you that your project is not feasible because you cannot provide all of the notary and warranty costs?
No worries, it is now possible to acquire a property without contribution or with a contribution that does not fully cover the costs associated with the purchase price of your property! It’s possible yes but under certain conditions, obviously ?
Borrowing without contribution is easy under certain condition.
The rule: The contribution must finance the additional costs
As a general rule (there are exceptions!), Banks ask to finance agency fees, notary and guarantee fees as well as administrative fees from their own funds. Or about 10% of the purchase price in addition to the agency fees.
In short, most banks will agree to finance only the price of your property net of any costs, or 100% of the purchase price at most.
The reason is extremely simple: if the borrower does not repay the loan, he will seize the property to resell it, without losing the incidental costs.
Borrow without contribution: Yes, but…
In this case, there must be good reasons for not having a contribution so that a bank can accept to lend you. This is called 110% financing, that is to say that the notary, guarantee and administrative fees are financed by the mortgage.
These cases remain rare but exist. Some banks specialize in this type of financing and others practice it from time to time but they will be extremely vigilant about your financial situation.
Several borrower profiles can obtain 110% financing, but in any event it will be strictly necessary to respect a maximum debt ratio of 33% (even for the best profiles). That is to say that all of your expenses should not exceed 33% of all of your income, quite simply.
The profiles that have a good chance of borrowing without contribution are the following:
- Young borrowers, on the condition that they are first-time buyers and that they are considered as “potential profiles”, that is to say that their income is bound to increase rapidly. They recently entered working life and did not necessarily have time to save before buying a property, the banks understand it very well!
- Individuals with high incomes who already have a significant property and / or financial heritage, and who can afford to invest without risk of no longer being able to pay the monthly payments on their new credit. This type of borrower will have to benefit from a significant living balance (remaining cash after payment of all their credits).
- Investors who buy rental property and want to reduce their taxes by deducting interest from their loan. They therefore have an interest in borrowing all additional costs and benefiting from the largest loan amount.
It will be complicated, but not impracticable, to borrow without contribution if you are not in one of these three cases. Borrowing without contribution remains a rather infrequent but possible case.
It is however preferable to present a loan dossier with a contribution covering the ancillary costs at a minimum, even if it means asking your family for help. The reason is extremely simple: Few banks position themselves on 110% financing so those who do will not offer you the best market conditions but slightly better conditions, and much lower negotiating margins (especially at the level of exemption from prepayment penalties, loan modularity, interest rate and borrower insurance).
It is simply the game of supply and demand! There are many requests for financing at 110%, and very few banking offers in this area.
- Borrowing without contribution is possible for certain specific profiles
- Only certain banks will accept to finance the purchase price and the additional costs (notary, guarantee, administrative fees, etc.)
- The bank offer being reduced, the conditions you will get will not be optimized at best