What Is a Personal Contribution to a Real Estate Loan

Summary

– A personal contribution to complete your real estate loan

– The personal contribution comes from your savings or loans at reduced rates

– The personal contribution: the ideal is 30

– To obtain a real estate loan without personal contribution

At least 10% of personal contribution, the ideal 30%.

A personal contribution to complete your real estate loan

The down payment is the amount of money that you will invest in your purchase to complete the loan. It is expressed as a percentage of the amount of the operation.

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Example

– You want to buy a property worth $500 000.

– The amount of your contribution is $100 000.

– You borrow $400 000.

– The percentage of your contribution is 20%.

The personal contribution used to pay the notary fees or others is not considered in the ratio.

Moreover, in addition to the personal contribution, the banks often require that the borrower pay various expenses such as the expenses of file or the expenses of guarantee.

If you have a project, we can put you in contact with specialists in real estate credit. They will be able to establish a free estimate without engagement.

The personal contribution comes from your savings or loans at reduced rates

This sum that you are going to bring can come from:

– your savings;

– the release of company participation (for the purchase of a property in a principal residence, your company is obliged to release your participation in advance);

– the release of a savings product;

– an inheritance or a donation;

– some banks also consider other subsidized loans with reduced rates to be a contribution:

◦ social loan;

◦ zero-interest loan;

◦ other “small loans” (civil servants, regional loans… under resource conditions).

The personal contribution: the ideal is 30%.

The personal contribution will allow you to negotiate the conditions of your loan.

Note: banks generally require a minimum contribution of 10% of the purchase price. This amount is at least equivalent to the notary and deposit fees.

– The more your contribution exceeds this 10%, the more the bank will have confidence in your ability to save and will be able to offer you an interesting rate.

– The ideal to obtain a reasonable rate is a personal contribution of 30%.

– If you don’t have much in the way of savings, try taking out a subsidized loan to increase your down payment as much as possible.

Obtaining a real estate loan without a personal contribution

Borrowing without a personal contribution is difficult but possible. The banks will then carefully detail your file. They pay particular attention to:

– the professional seniority;

– the security of employment;

– financial stability.

If the lack of savings of the borrower comes from his lifestyle, the banks will be more reticent than if it comes from the lack of professional experience of a young person, a divorce, an illness…

In any case, the real estate loan granted will generally have a higher interest rate than in the case of personal contribution.

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