There are more or less 5 major mortgage loan formulas all different from each other. You have to think carefully about the choice you are going to make. This will be decisive for the method of repayment of your future mortgage but also for the risks that may be engendered by the choice you will make.
Home loan formulas
Let’s take a look at the main mortgage loan formulas available on the market:
- Constant monthly payment
- Constant capital depreciation
- Fixed term
- Credit in branch 23
- Bridge credit
Mortgage: constant monthly payment
Here is the first formula and certainly one of the most common mortgage formulas in Belgium. As the name suggests, when you take out a mortgage with a constant monthly payment, you always repay the same monthly payment including an interest part and a capital part. This reimbursement is made for the entire duration of the credit. Initially, you pay back a lot of interest and very little capital. As your credit changes, the balance will reverse.
Constant capital depreciation
Constant amortization of capital is one of the most attractive mortgage formulas on the market. It makes it possible to reduce the average rate of your mortgage. The principal part reimbursed always remains identical throughout the duration of your credit. So, you start with a higher monthly payment and as your repayments decrease.
This formula is reserved for informed borrowers but attractive by the low monthly payments reimbursed. During the entire term of your loan, you only repay interest (you therefore do not repay capital!). This implies that at the end of your mortgage, you will have to settle the capital in one go either with equity, or via an investment (branch 23), or via group loan insurance, etc.
The fixed term is often used in branch 23 credit.
The credit formula of the moment (to be taken with tweezers) !!! Using the principle of the fixed term, credit in branch 23 is made up of an investment in shares which is supposed, at the end of your mortgage, to repay the entire borrowed capital. This formula involves enormous risks linked to the stock market and its investments. Too few credit brokers clearly explain the different risks associated with this type of loan and highlight the weakness of the monthly payment to carry out their business. Unfortunately, we were forced to note that many people who subscribed to branch 23 did not even know the content of their choice.
The major risks are :
- Obligation to sell if the capital generated is not sufficient to repay the capital borrowed
- Redo a mortgage to settle the capital (if this is still possible)
To conclude, the managers of branch 23 have an obligation of means and not an obligation of result. This means that they must make every effort to achieve the expected result without guaranteeing it. At your peril !!!
You now have a good overview of all the credit formulas available on the Belgian market.
One of the mortgage formulas that allows people selling one property to buy another is called bridge credit. It is a bridge loan between your old property and your new house. The bridge loan is a temporary loan with a maximum duration of 24 months. During this period, you only repay interest and the day you pass the deeds for the sale of your current property, the notary closes the credit bridge by reimbursing it directly to the credit agency concerned. In some cases, it is possible to pay no interest during the term of the credit. In this case, the capital and interest are reimbursed by the act at once.