Borrow over 35 years for a home loan, it’s possible!

Borrow over 35 years for a home loan, it’s possible!

Some banks offer home loans over a period of 35 years … A trend that happens little by little among credit professionals who mainly want to attract first-time buyers and young people.

Bank offers real estate loans over 35 years

The CFCAL subsidiary of Crédit Mutuel offers mortgage loans for 35 years at a rate of 2.55% excluding insurance against 1.47% on average in February 2018. A trend that happens little by little among credit professionals who especially want to attract first-time buyers and young people. Note that according to the CSA Housing Credit Observatory, 30% of home loans have a duration of more than 25 years. The term of home loans is 218 months on average and tends to grow.

A drop in demand for loans that worries

A drop in demand for loans that worries

Why specifically target this category of first-time buyers and young people? because they are the ones who are hit hard by the decline in public supportand have the least capacity for reimbursement and personal contribution. Penalizing criteria as the price of real estate increases intense areas. Even low-interest rates cannot compensate for this. Result a slowdown and even a decline in the demand for real estate loans that worried bankers.

To be able to buy a property without increasing its debt ratio, some banks offer long-term or even very long mortgages between 30 and 35 years … But that has advantages and disadvantages …

Borrowing in the long term offers advantages and disadvantages:

Borrowing in the long term offers advantages and disadvantages:

Repayment payments will be lower and the debt ratio will not increase. The solvency of first-time buyers is also maintained. The amount borrowed will be a little higher.

The extension of the loan term leads to higher rates to cope with the risk. Even if banks make efforts to offer attractive rates, the latter for a period of 35 years remain higher than for 15 or 20 years. The amortization is very slow: with a loan of this duration, after 5 years, we own less than 3% of housing.

The 35-year real estate credit carries a significant risk: that of having to resell even before having started to repay the capital. And the real estate market is fluctuating, with a risk of a lower market price than that of the initial purchase. Banks will also request that the borrower not be over 65 at the end of the loan.