What alternatives to providing a mortgage guarantee

mortgage credit

You want to borrow a sum of money to buy a kitchen, or finance the acquisition of your veranda for example, to buy a house or to carry out renovations.

In addition to the usual acceptance conditions, your broker will check your solvency and require guarantees.

When the amount borrowed is significant – beyond €25,000 – it may happen that your broker requires the creation of a mortgage on a property of which you are the owner free of charges. This is almost always the case when purchasing real estate. Of course, there are costs associated with setting up a mortgage.

Are there any alternativesem , to taking out a mortgage on one of your real estate?  This is what we are talking about today.

What is a mortgage?

The mortgage is a real property right which is often granted by the borrower in order to guarantee the repayment of a sum of money that he has borrowed. This is a comfortable guarantee for the creditor insofar as real estate is property which maintains a stable value and which even tends to appreciate over time – barring extraordinary situations.

Are there alternatives to taking out a mortgage?

Of course, the borrower can always offer other guarantees. We immediately think about the guarantee or the addition of a guarantee. Other more original alternatives are sometimes proposed, such as the redemption of pension savings or life insurance.

Note that for these latter cases, the beneficiary of a pension savings or life insurance which buys back its rights before the end of the contract is rarely a good deal. In general, the early surrender value is very unfavorable.

In certain cases, guarantees are taken on movable assets (securities accounts or savings accounts).

Effectiveness of these alternatives ?

The success of these alternatives is very average because generally the resulting solvency is problematic and when the sums borrowed are very large, the bank will not be satisfied with random guarantees.

Family allowances and your credit application

Can a borrower add the family allowances they receive to their income to obtain a loan? In a more general sense, what income is considered when applying for a consumer loan or a mortgage?

Family allowances

Family allowances represent a significant financial aid for each family. Thus, in Belgium, parents receive a monthly allowance of €90.28 for the first child; an allowance of €167.05 for the second child, and an allowance of €249.41 per child from the third child onwards.
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Can these amounts be taken into account to assess your total income for obtaining a loan?

The answer is decidedly negative. You cannot rely on your family allowances to obtain a loan, regardless of the type of loan, the borrowed amounts, or the loan duration.

Family allowancesWhy? It is the Belgian legislator who aimed to protect family allowances and reserve them for the purpose for which they were created. Similarly, your family allowances are not subject to seizure, which would prevent a financial institution from seizing them in case of default.

Aside from employment income, are there any other sources of income that can be considered for obtaining a loan?

Of course, the legislator allows you to include in your income for the purpose of obtaining a loan:

  • Rental income, meaning the income you receive from renting a building, part of a building, and more generally from any real estate property of which you are the owner. However, the legislator limits this consideration to 80% of the amount of rental income.
  • Income from movable assets generated by financial investments (securities account) or interest received on your savings account.
  • Legal pensions, except pensions paid for disability benefits.
  • Income received as replacement due to disability.
  • The declared income from a supplementary professional activity.
  • The allowances received from your health insurance fund.

What are the other incomes or allowances that are not taken into account?

Aside from family allowances, the following are not taken into account:

  • Unemployment benefits because, like family allowances, these allowances cannot be seized and therefore cannot be considered as useful collateral for a financial institution.
  • Income received in contravention of the tax obligations in force in Belgium (undeclared income). Indeed, any proceeds from a tax offense constitute, under Belgian tax criminal law, a criminal offense liable to be prosecuted before the criminal court. The banking institution that would agree to take into account the proceeds of such an offense would therefore become an accomplice and guilty of money laundering and concealment.

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The various aids granted for the purchase of a hybrid vehicle

Driving “ green ” means reducing the release of C0² produced by your vehicle into the atmosphere while significantly reducing fuel consumption. The hybrid car constitutes an interesting alternative to achieve this objective. What credit for the purchase of a hybrid vehicle?

Various incentive measures are taken both at the federal state level and in each region to encourage Belgian motorists to choose this type of vehicle. What are these bonuses and deductions?  Follow the leader.

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The ecobonus of the Wallonia region

A recent survey carried out by the car retailer Cardoen indicates that only 2.6% of Belgians plan to purchase a hybrid car.  To encourage them, the Wallonia region is offering an ecobonus bonus of 2,500 euros for vehicles registered since January 1, 2013 whose CO² emission rate is between 0 and 20 g/km.   
Hybrid car and taxation
For a rate between 21 and 40 g/km, this premium is 2,000 euros.   Between 41 and 50g/km, it drops to 1,500 euros, then to 500 euros for C0² emissions which fluctuate between 51 and 60g/km.     Finally, if the car emits between 61 and 70 g/km of CO², the premium is reduced to only 250 euros.  This bonus concerns hybrid vehicles whose catalog price does not exceed 30,000 euros .

Update on tax deductions

If the CO² emission per km does not exceed 105g, the Belgian motorist benefits from a tax reduction equivalent to 15 % of the purchase price of the car, an amount capped at 3 280 euros.    On the contrary, if the rejection rate is between 105 and 115 g/km, the tax reduction is 3% of the purchase price, with a limit set at 615 euros.  

This tax reduction occurs directly at the time of acquisition since it is deducted from the amount to be paid by the motorist.

Finally, companies benefit from a tax reduction of 90% if they use a hybrid vehicle to transport their employees.  At the same time, they benefit from a relatively low level of their all-in-kind benefit (ATN) which is 55 euros, and benefits from a reduced taxable amount. 

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Which interest rate is best for me?

What is fixed interest rate? 

In this formula, you benefit from an interest rate which will be identical for the entire duration of the execution of the loan / mortgage credit.

This is a particularly interesting formula when rates are low and likely to increase over time. Currently interest rates are historically low and this is therefore the ideal formula.

What is the semi-fixed interest rate? 

In this formula, you benefit from a fixed rate for a period of 10 years and then a rate review takes place.

This formula is interesting when rates are likely to increase in the future.

What is the graduated interest rate? 

In this formula, you repay more interest than capital. The monthly payments are linked to the index and increase by €30 to €40 every two years.

This is a particularly interesting formula for young people whose professional salary is expected to increase over the course of their career.

Credit figures in Belgium: news

In Europe we have been going through a major financial crisis since 2008: in fact, the unemployment rate has never been so high, it has reached a record figure of 12% of the total population of Europe and the number of bankruptcies is also breaking records. records every year.

The governments of the European Economic Area are trying to revive growth after several quarters of recession; growth is reappearing but very weakly. This gloomy economic environment is obviously felt in the world of credit. Update on this hot topic.

Belgians are always borrowing more with credit in Belgium

Belgians are borrowing more and more for secondary purposes

Ten or 20 years ago, Belgians borrowed mainly to buy a house, to build or renovate their house or to take out car financing. Currently, it has become quite common to take out a loan to go on a trip, buy school books or finance cosmetic surgery. In 2010, barely 6% of  installment loans were used for such personal projects compared to almost 15% now, a dizzying increase of 9% in just 3 years. .

Belgians borrow larger amounts

At the end of June 2012, Belgians still accumulated around 2 million installment loans, i.e. 12% more than 10 years ago according to figures from the Professional Credit Union (PCU). The cumulative amount of all these loans was equivalent to a total of 16.63 billion euros, an increase of almost 57% over a period of 10 years…

The amounts borrowed are also much greater. a survey carried out on 1,200 people representing a significant panel showed that 46% were repaying a loan at the time of the survey compared to 38% three years earlier.

The amount of defaults has never been higher

As a corollary to the explosion in the number of loans, the amount of Belgian defaults reached 2.888 billion euros in August 2013 and has never been so high in Belgium according to the latest figures from the Personal credit center.

Mortgage credit in slow motion

Although consumer confidence is on the rise, the economic situation remains difficult. Thus, requests for mortgage credit declined in August. According to figures for the month of August from the UPC mortgage credit barometer, the number of mortgage credit applications decreased by 6.8% on an annual basis, while the amount of applications fell by 6.4%.

The credits granted have also declined in terms of demand (-13%) and amount (-10%).

We therefore see an evolution in the opposite direction of mortgage credit compared to the installment loan.

A glimmer of hope for credits granted to SMEs

credits granted to SMEsIn these times of crisis when credit is scarce, the Minister for the Middle Classes, Sabine Laruelle, and Koen Geens, the Minister of Finance, are pleading in favor of SMEs. They have set the bar very high with a new bill which forces banks to make a real effort to facilitate access to credit for SMEs.

Already approved by the government, this batch of proposals must be effective from next fall without retroactive effect on credit contracts already in progress.

What are the new measures?

In a context where more than half of SMEs have already given up in the face of banks’ reluctance to be more lenient in granting financing, the situation seems to be changing.

Banks will, in fact, soon be obliged to better explain the reasons for refusals. They will also have to deploy all possible means to find a solution to each credit request before closing their doors.

According to the head of government, these measures make perfect sense since SMEs constitute a real economic hub and a promising sector in terms of employment. More than real constraints, these measures aim to invite banks to make the information provided to their customers more transparent and to be more attentive to each request submitted to them before deciding. If the granting of credit is refused, the financial institution will need to justify its reasons through a clear and understandable statement.

Thanks to a more in-depth study of risk analysis, SMEs and self-employed people will be able to better prepare their file before processing a credit application. In the event of failure, they will have the opportunity to better understand the origin of the problem and try to improve their profile before resubmitting a credit application.

The UMC’s opinion

The Union of Middle Classes (UMC) does not hide its enthusiasm at this development of this situation which will undoubtedly gradually clear up the latent economic gloom which has already set in in the SME credit sector. The UMC also specifies that the claims of companies and self-employed people are not exaggerated since the amount borrowed is generally below 100,000 euros for self-employed people and around 200,000 euros for SMEs.

Another important point

Re-employment compensation will have to be estimated in such a way as to erase any gray area. Re-employment compensation will have to be estimated in such a way as to erase any gray area. Beyond this amount, banks and SMEs will need to work together to propose a rational calculation method within three months, otherwise the government will take its responsibilities.

This bill promises to breathe new life into the granting of credit for SMEs but we must not lose sight of the fact that banks will not fundamentally change their prudential policy and that a well-constructed file will always be the best guarantee of acceptance

The mortgage market is stable

mortgage loans

The mortgage credit market is a revealing indicator of the health of the economy in Belgium. Indeed, the Belgians still consider that real estate investment is preponderant in the allocation of expenses in their budget. Also, an increase or on the contrary a contraction either in the number of contracts or in the amounts borrowed has a real value in terms of micro-economic analysis on the Belgian markets.

The mortgage market is stable

The number of mortgage credit contracts concluded over the July-September period is slightly lower than in the previous quarter but the overall amount of funds borrowed remained around 5 billion euros.

The latest statistics published by the Professional Credit Union (UPC) show that 46,000 mortgage credit contracts were signed, i.e. 2,000 months compared to the previous quarter. The drop in the number of contracts is almost mainly due to the decrease observed in renovation credits (-1,700).

Over one year, we still note a contraction of 9% in the number of contracts and 8% in terms of amounts borrowed.

The average amount borrowed is stable. For the purchase of a home the average stands at €135,000, which is the status quo compared to the previous quarter.

Note also that 78% of borrowers opted for a fixed rate in the third quarter.

We can therefore conclude that in general, the economy is no longer regressing but is not growing either.

Am I required to take out death insurance?

When you borrow with another person and in the event of this person’s death, you would not be able to pay the loan alone, you are strongly advised to take out death insurance in your own interest. In certain cases, the financial partner makes the granting of credit conditional on the conclusion of credit insurance.

The FSMA, the big boss of credit!

intermédiire en crédit

The Financial Services and Markets Authority (FSMA) is a public interest body that regulates the Belgian financial sector. As part of its mission, it notably oversees financial service providers and intermediaries. Our legal expert examines the scope of this new competence.

New FSMA Competence

Since November 1, 2015, the control over access to the profession of lender and intermediary in mortgage credit and consumer credit will no longer be the responsibility of the SPF Economy but of the FSMA.

This will have no impact on consumers as existing contracts will not be modified in any way. However, the targeted professionals will be required to apply for approval or registration with the FSMA.

To do so, the concerned professionals can submit their approval or registration application through an online application since Monday, November 2, 2015.

The FSMA has already clarified that this is the only valid channel for submitting an application. In order to obtain approval, professionals must meet various conditions, such as having a capital of €25,000 or €2,500,000 depending on whether it concerns a consumer credit contract, a mortgage credit, or a credit opening.

However, the SPF Economy retains the competence to examine credit contract templates, including amortization schedules, to ensure compliance with all legal provisions.

Any modification to the contract templates is also subject to prior approval by the SPF Economy. To obtain registration, professionals must meet various conditions, such as having professional liability insurance, having professional integrity, and adhering to an extrajudicial settlement scheme.

Current lenders and credit intermediaries benefit from a transitional period of 18 months to submit their application for approval or registration.

Sanctions

The FSMA has a wide range of coercive measures against the professionals it oversees, including issuing a public warning.

It can also impose various corrective measures and conduct anonymous inspections.

Finally, it can take administrative measures such as revoking approval or removing from the registry, as well as imposing fines or penalties.