Comparison of mortgage loan offers: How to choose?

Choosing the right mortgage loan is an essential step in financing the purchase of real estate under the best conditions. With a multitude of offers available on the market, it can be difficult to navigate and make the right choice. This article guides you through the main criteria to consider when comparing mortgage loan offers and choosing the one that best suits your situation.

Criteria to consider when comparing offers

To effectively compare mortgage loan offers, several criteria must be taken into account:

• Interest rate: The interest rate is one of the most important elements to compare. It can be fixed or variable. A fixed rate remains the same throughout the loan, providing security on the amount of monthly payments. A variable rate, on the other hand, can fluctuate based on reference indices, which can lead to variations in monthly payments.
• Annual Percentage Rate (APR): The APR includes not only the nominal interest rate, but also all ancillary fees (application fees, guarantee fees, borrower insurance, etc.). It represents the total cost of credit and allows for a more precise comparison between offers.
• Application fees: Application fees are administrative fees charged by the bank for processing the loan. They can vary from one bank to another and be negotiable. It is important to take them into account in the comparison.
• Guarantee fees: Guarantee fees (mortgage, guarantee, lender's privilege) must also be taken into account. They can represent a significant portion of the total cost of credit.
• Borrower insurance: Borrower insurance is often mandatory for a mortgage loan. The cost of this insurance can vary depending on the borrower's profile (age, health status, profession) and the guarantees taken out. It is possible to take out insurance externally to that offered by the bank to obtain better conditions.
• Loan term: The loan term directly influences the total cost of credit. The longer the term, the higher the total cost of credit, but the lower the monthly payments. It is important to find a balance between the loan term and the amount of the monthly payments.
• Early repayment conditions: Some loan offers provide for penalties in case of early repayment. It is important to check these conditions, especially if you plan to repay your loan early.

Comparing interest rates and APR

Interest rate is often the most highlighted element by banks, but it is important not to limit yourself to this criterion. The APR is a more comprehensive indicator that includes all fees related to the loan. By comparing the APR of different offers, you can get a more precise view of the total cost of each loan.

Real-life examples

Suppose you are comparing two mortgage loan offers of €200,000 over 20 years:

• Offer A: Interest rate of 1.2%, APR of 1.5%, application fees of €1,000, borrower insurance of 0.36%.
• Offer B: Interest rate of 1.4%, APR of 1.6%, application fees of €500, borrower insurance of 0.32%.

Although Offer A has a lower nominal interest rate, Offer B may be more advantageous due to lower application fees and borrower insurance. The APR allows for a more precise comparison of the two offers.

Using online simulators

Online simulators are valuable tools for comparing mortgage loan offers. They allow you to calculate monthly payments, total cost of credit, and APR based on the criteria you have entered. By using multiple simulators, you can refine your search and get a clear view of the different options available.

Legal texts regulating the comparison of loan offers

The comparison of loan offers is regulated by the Consumer Code, in particular articles L312-1 to L312-93. These texts specify the obligations of lenders in terms of information and transparency, as well as the rights of borrowers in terms of choice and negotiation of credit conditions.

Conclusion

Comparing mortgage loan offers is a crucial step in obtaining the best financing conditions. By taking into account the interest rate, APR, application fees, guarantee fees, borrower insurance, and early repayment conditions, you can choose the offer that best suits your situation. Before committing, do not hesitate to use online simulators and consult a financial advisor to ensure you make the best choice.