Why do Borrowing and Saving Work Together?

With the phenomenon of low interest rates, borrowing funds with the objective of acquiring real estate costs less than before (before 2016). As proof, the real estate purchasing power of the French has increased by 36% since 2008. But what is this data translated? In practice, at equal monthly installments, a current client can borrow 36% more capital than a borrower of the past.

 

Savings rates above borrowing rates

Savings rates above borrowing rates

As a result, this comes down to the possibility of acquiring additional square meters. In some localities, it is possible to obtain up to a non-scheduled room in the initial researches namely a bathroom, a dressing room or even a small room.

But do these reduced rates benefit everyone? When a household has sufficient liquidity, should he consider a home loan for his project? The question may arise. To answer this question, one must take into account the level of the rates of remuneration of traditional savings and also that of the interest rates of real estate loans. To put it simply: the rates of return on savings books or life insurance are no longer attractive. Faced with this bad luck, it is not always interesting to immobilize its funds on products that will return a meager profit once the social contributions levied.

 

Credit without input drives investment in stone

Credit without input drives investment in stone

Yes but, because there is a but, historically low mortgages change the deal considerably. By borrowing at a reduced rate, borrowers can continue to invest their cash. Investment interests, even small ones, may cover the interest of a mortgage. This is particularly true if the financing transaction is carried out without the payment of a contribution, which is more commonly called a 110% credit.

In other words, the low rates are the reason for the cash purchases, that is to say without borrowing. Loan conditions are so attractive that they are favored by clients with sufficient funds to pay cash for this transaction. Low rates are therefore a boon for investors and especially for those who want to turn to rental investment. In this configuration, the rent collected can cover the monthly repayment of the loan. But low rates do not preclude paying close attention to loan insurance that can account for up to a third of the total cost of real estate financing.