The personal contribution is an essential asset when preparing a loan file. It makes it possible to reassure banks and obtain quick money now 321 , at lower interest rates. How can we make a personal contribution? What is the ideal amount? Is it possible to borrow without a contribution?
The personal contribution is the amount of money that the borrower invests in his purchase project in addition to the loan. This amount is expressed as a percentage of the aggregate amount. If, for example, a borrower wishes to acquire a property worth 100,000 euros, borrow 80,000 euros and add a personal contribution of 20,000 euros, then the percentage of this contribution will be 20%.
How to constitute it
The personal contribution can come from the savings of the borrower (savings plan housing, booklet A …), an inheritance or a donation. Other mechanisms are also used to finance its contribution, such as the unblocking of the participation (in the context of the purchase of a main residence, participation in the results may in fact be unblocked in advance), or specific loans the zero interest rate loan, the 1% housing loan, loans granted by CAF, and local, regional and departmental loans.
Target Cash Now Amount of contribution
The law does not set a minimum amount for personal contribution. In practice, however, banks generally require a minimum of 10% of the purchase amount. To obtain better borrowing conditions, a contribution between 20 and 30% is most often advised. This participation helps to reassure banks about the ability to save and therefore to repay a loan. Thus, they tend to accept a file more quickly and offer lower interest rates.
In addition, the maturity dates decrease with the amount of the loan. However, it is recommended not to invest all of its savings in the personal contribution, in order to maintain flexibility and to be able to cope with any additional costs, such as those related to the financing of works, for example.
Absence of input
Not all borrowers have the equity to invest in their project, as is the case for many young people who have recently entered the workforce. Although it is increasingly difficult to borrow without a personal contribution, this is still possible. In this case, we speak of a 100% loan, or 110% when it also takes into account ancillary costs (notary fees and transfer taxes, agency fees, etc.) in addition to the purchase price.
To be able to borrow without a personal contribution, it is necessary to constitute a solid file and to provide guarantees to the lending institution. The borrower’s income, its investments and its history of indebtedness will be the first elements taken into account by the bank. In the case of a mortgage, the purchased property constitutes an additional guarantee, since the bank will be able to reimburse itself on the sale of the property in case of default of the borrower. However, it should be borne in mind that the interest rate will generally be higher for a loan without a personal contribution.