40 Years Old | Loan and Credit
Contra irement to other countries like England, France has always had a financial approach to credit. a 40-year loan would have been unthinkable just a few years ago.
Today with rising house prices, first-time homebuyers wanting to acquire their principal home can not afford to borrow as their parents did over 15 years.
The 40-year loan remains rare
If the duration of real estate loans tends to lengthen in recent years, the loan over 40 years is not yet fully in the mornings. Is it the reluctance of banks or the prudence of borrowers?
Traditional banks refuse loans over 40 years
Do not go to traditional banks if you want to borrow for long periods. They offer no credit over a period of 35 years, let alone 40 years. Their proposals do not go beyond 30 years and still, they balk to lend on durations of this type.
Only specialist organizations such as CREDIT IMMOBILIER DE FRANCE, CREDIT FONCIER, GE MONEY BANK or CETELEM IMMOBLIER offer long loan terms.
Borrowers do not take the plunge
Borrowers also do not like long credit terms. Going into debt over a lifetime of work is it worth it? Only young workers can in any case consider a loan of this type. It is unlikely that a 45-year-old commits to such a period. This would also pose a problem of insurance because the borrower would not be insurable on the last years of the loan.
What is the cost of credit for a period of 40 years?
In addition to the borrower’s risk of borrowing over 40 years, the other disadvantage is the cost of credit.
Take for example a loan of € 150,000 and compare two borrowers. The first borrows over 25 years, which is a very used term and the second borrows over 40 years. The rates will not be the same. We looked at the rates offered by brokers for the month of March 2010 and took an average rate of 4.30% over 25 years and 4.80% over 40 years.
Over 25 years, the credit will cost 95 050 € for a monthly payment of 817 € and over 40 years … 187 700 € for a monthly payment of 703 €. To pay € 114 less each month, it will cost 96,000 more to the borrower.
We have seen that a loan over 40 years is extremely expensive even if this choice may be essential to the purchaser but ultimately the decision must be made according to the financial situation of each.