In an economic context like ours, theproperty purchase seems more and more inaccessible. Since the end of Covid, banks are cautious, even cautious, on certain projects. Get a real estate loan without contribution seems to be, today, mission impossible. However, this condition is a leverage major for funding real estate. The Holy Grail of all investors. So, how can you make the banks fold and buy without usingpersonal contribution ? Can we still use this lever in 2024? Your YourHostHelper agency tell you everything.
What is leverage in real estate?
In finance, leverage is a concept which consists of using a loan to obtain a high-return project. We consider this effect to be exceptional when we obtain a remarkable output with little effort.
For a real estate purchase, the effort corresponds to the personal contribution made. The goal is to reduce this share to amplify the leverage effect created with bank credit.
Simply put, it is borrowing money to invest, with the expectation that the return generated by that investment will be greater than the cost of borrowing. Using leverage allows you to build your real estate assets without investing your own money.
What are the advantages of a loan without contribution?
There are different investor profiles. Some people have been saving for years to buy a primary residence. Others play with bank credits to benefit from additional income every month.
However, when we embarked on our first investment, we did not all have the means to advance a contribution to buy a home.
In 2024, banks require around 10% personal contribution, mandatory to validate the loan. Or €12 for accommodation costing €000. This effort is requested from investors automatically (in addition to notary fees).
Obtaining a mortgage loan without down payment, however, has many advantages for future buyers.
- You gain access to real estate with greater valuation potential.
- You keep your cash. These can be used for other investments or to cover unforeseen events.
- You maximize the leverage of your investment by improving your real estate returns.
- You can claim reduced taxation thanks to loan interest which is often deductible from property income.
Obtaining credit without investing personally will allow you to finance your entire real estate purchase with a loan. The rental income received will cover the monthly loan payments, but it will also generate a cash surplus. Your debt ratio being at zero, you will be able to reinvest in another project by letting your credit finance itself.
Obtain a mortgage without contribution
Maximizing leverage is the primary goal of any good investor. However, in reality, bankers are not easily convinced. To obtain a mortgage without down payment, you have to understand the workings.
What investments are affected?
The leverage we are talking about mainly concerns rental purchases. Your bank will place more confidence in a project that does not risk putting you in debt (and therefore causing it to lose money). The purchase of your primary residence directly impacts your debt ratio. Every month, you pay your credit.
For a rental purchase, on the contrary, you receive rent. If it is a successful investment, these rents allow you to pay all of your monthly bank payments. Your financial situation is therefore not affected.
Banks will therefore be more open to helping you with a rental investment, rather than a main residence.
How to please your banker
Your advisor is the keeper of the keys. He has the possibility of supporting your file with the bank or of classifying it among ordinary requests. Here are some tips to convince him of the validity of your project.
Optimize your borrower file
Are you aware of the teacher-student bias? This natural domination should not be established once in front of your advisor. You must show your expertise and knowledge of the subject. A bank will be more likely to trust you if you prove to them that you know what you are talking about.
To do this, nothing could be simpler: prepare for your appointment. There is nothing worse than an investor who arrives with half the documents to present a convoluted project. To obtain a mortgage without contribution, you must refine each stage of the purchase and prevent possible questions from your banker.
- Take care of your profile: with stable income, ideally on a permanent contract, with income that can cover the monthly loan payments.
- Check your debt ratio: if you already have outstanding credits, make sure that their amount is reasonable in relation to your income.
- Prove your savings capacity: this is a reassuring point for your advisor. This shows your seriousness. Showing that you have regular savings capacity can work in your favor.
- Detail the type of property desired: don’t hide anything from your banker. What are the planned investments and expected returns? How did you find out? What safety cushion have you provided? The more information you have to provide, the more easily you will convince yourself of the merits of the project.
- Communicate your overall vision: is this investment the first in a long list? Say it! Your advisor is a human being. Do not hesitate to involve him in your ideas to make him understand that your project comes from a long period of reflection.
Obtaining a mortgage loan without down payment may seem difficult in the current context, where banks are cautious. However, this leverage effect is a significant asset for making your rental purchase profitable. As an investor, you have everything to gain. To convince the banks, your real estate agent advises you to prepare a solid file. Present your project in its entirety, create a relationship of trust by being sure of yourself. Do not hesitate to highlight the stability of your profile as well as the forecast rental income.
Do you need help putting together your file? Find our real estate experts in your YourHostHelper agency in Fréjus to define your project. Put all the chances on your side to obtain your real estate loan without down payment!
