Why do you need a broker?

On the one hand, borrowing fixed-rates, but also variable capped, have highly decrease over the last few months (passed from 5,4 % for an average fixed-rate during 20 years in October 2008, to 1,80 % in March 2016). Nevertheless, the current situation has been coming with an intensification of mortgage acquisition conditions.
In this circumstances, brokers are appealing more frequently to borrowers. Henceforth, borrowers resort to a broker not only in the purpose of getting optimal mortgage condition but also in order to approve their mortgage file while having access to other financing solutions. Not forgetting that a broker will save your time. Combining expertise, precision and rapidity, Keasy guarantees you attractive conditions for your mortgage in Luxembourg.


The different rates

The commercial banks, that is the different agencies, are financing themselves to the Central Bank (in Europe it is the BCE). The financing has a price which depends on the level of the key interest rates of the Central Bank. Those costs are imputing to borrowing rates which will vary in the same direction as key interest rates. The borrowing rate is generating interests. It is the benefit that is making the Banking Institution which is loaning a sum of money.
- Fixed rate A fixed-rate is a borrowing rate which is not affected by market’s fluctuation. Therefore it will remain the same for all the duration of the loan. The rate is defined by the signature of the contract which is leading to constant payments. Consequently, a fixed-rate insure a security for the borrower who is able to budget its reimbursement for all the duration of the credit.
- Variable rate A variable rate is an interest rate which fluctuate according to the interest rate of the European Central Bank. The rate is revised annually in the majority of cases during all the duration of the loan. The borrower is taking the risk to see its payments decrease from a year to another according to the time of the mortgage. This type of rate provides the benefit to be in general lower as a fixed-rate at the beginning of the loan. On the other hand, payments vary from a year to another. The borrower could base himself on the evolution of the rate’s variation but this one is never guaranteed. The variable rate is linked to an index, the Euribor and fluctuate in the same direction as this one.
- Revisable rate A revisable rate, also called mixed-rate, is the combination of a fixed-rate at the beginning of the loan following by a variable rate for the rest of the time. Some of banking establishment are also offering an “accordion” credit. It is about a loan of variable capped rate with a fixed and steady payment. In case of increase (or decrease) of the rate, the duration of the credit is extended (or shorten) according to the terms implemented by the bank. A maximum duration is agreed while the signature of the credit contract.


Capacity of reimbursement

One of the norm of the bank system involves that the rate of debt doesn’t have to exceed 33 %. Therefore, the third of the income has to cover the whole of charges (rent, credit payment …). Moreover, banks are also defining a balance of “subsistence allowance”, which means it is the minimum sum remaining for the borrower to meet it needs.


Guarantees requested by banks

In order to cover themselves against potential failure of reimbursement of the borrower, banking establishment have recourse to various guarantees: ​
- The mortgage 1st row on the financed asset: Mortgage of 1rst row on the financing real estate: a mortgage is an official act registered at the notary which allows the money-lender, which is the bank, to seize the good in order to sell it again to reimburse itself if the borrower is not reimbursing its mortgage anymore.
- Mortgage on another mortgage.
- The disability insurance death-incapacity for work: Death-invalidity-incapacity insurance of work: the borrower subscribes a contract to an insurance company in order to cover the balance owed in case of death, invalidity or incapacity of work. The insurance substitute for the borrower in order to proceed to the reimbursement of the credit (temporary or permanently depending of the cases).
- The wage assignment: Wage assignment: the bank is able to debit directly its reimbursement on the borrower’s salary.
- The personal guarantee from a third: The personal guarantee of a third: the third commits to reimburse instead of the borrower if this one does not do so.


Differences between a mortgage and a mortgage mandate


A mortgage is an official act registered at the notary which allows the money-lender, which is the bank, to seize the good in order to sell it again to reimburse itself if the borrower is not reimbursing its mortgage anymore.
A mortgage is an official act registered at the notary which allows the money-lender, which is the bank, to seize the good in order to sell it again to reimburse itself if the borrower is not reimbursing its mortgage anymore.
A mortgage mandate created by a notary allows the bank through a mandate to seize the real estate property in mortgage if the borrower does not reimburse its credit anymore. Unlike a mortgage, a mortgage mandate is neither leading to registration rights nor mortgage rights. There is also no need for the subject of an official publication. However, a real estate property under a mortgage mandate cannot be implemented to another money-lender. The mandate is often more attractive for the borrower insofar that it is less expensive. On the other hand, it involves a risk for the money-lender if the real estate is resold.


Insurance

A mortgage is necessarily accompanied by an insurance. It is about the guarantee for the banking establishment if one of the three risks following occurs: death, invalidity, incapacity of work (according to insurances terms).


Loan home saving

The loan home saving is composed of 2 phases:
- During the 1rst phase, the borrower is saving. The monthly instalments are paid.
- During the 2nd phase, the borrower reimburse its credit, benefiting from an attractive interest rate because of its preliminary saving. The amount of the mortgage rate depends on the amount of the saving.