10 elements to watch before taking out a loan

Euro ou CHF : make the right choice

This is a particularity of our area, cross-border workers can borrow money in CHF. Although it is a great solution in a majority of cases (household income mainly in CHF for example) and often a cheaper solution than a loan in €, it might not be the best option for a rental property loan.

Franchise too short

The franchise allow you to not reimburse the totality of your instalment from the beginning of the loan, so that you don’t end up paying double: a rent and a loan or two loans at the same time. It is necessary to estimate the franchise duration properly, as a deadline overrun might always happen with a building project for example and thus an issue to cover the instalment of two simultaneous loans.

Defining the appropiate downpayment

Nowadays banks request a downpayment in order to finance any project. The objective is to optimise this downpayment so as to avoid immobilizing too much cash-flow which would prevent you from financing new projects or simply paying out unexpected bills. This is especially true with the fix rate loans for which the rates are very low currenlty and it goes along with a negotiation of the fees linked to advanced reimbursement.

Financial compensations

Nowadays interest rates are very low and loan generally speaking not so profitable for banks, credit institutions will then likely ask for some kind of compensations to be able to offer the best loan rates to customers. These compensations can be of different types: transferring your salary accounts, insurance for the financed property, transfer of your savings, life insurance products, etc.. It is necessary to well understand the type of compensations required as well as how compatible it is with your current lifestlye and financial set-up.

IRA : advanced reimboursement fees

In the case of an advanced reimbursement of your loan, the bank can demand that you pay some fees as defined in your contract. It is highly recommended to negotiate these conditions from the beginning, to ensure you keep as much freedom as possible.

Analysing your 10 years budget

In the case of an advanced reimbursement of your loan, the bank can demand that you pay some fees as defined in your contract. It is highly recommended to negotiate these conditions from the beginning, to ensure you keep as much freedom as possible.

Loan insurance: this is not only about life and invalidity insurances

Life and invalidity insurances are the most common ones and often mandatory, however there are also insurances to cover for the temporary inability to work or the loss of a job that can be added. Moreover there are institutions that will cover back pain and depression. All these elements require some careful attention when you are commiting to something as long as a home loan.

Commitment from entrepreneurs

The situation of a company boss or entrepreneur is very special, it is indeed necessary to split appropriately between the private and professional commitments so as to not get into a bad situation later. Careful attention also need to be provided to the guarantee and security given.

Co-borrower: marriage contract, civil unions or nothing…

Borrowing is a commitment, borrowing as one is an even bigger commitment, which needs to be organised very carefully so as to anticipate all the potential future situations. In the case of blended families, the situation can get even more complicated. The acquisition could be done with undivided conditios or with a contract like a civil union or marriage, eventually also through an estate management company . Depending on the situation, an appointment with a notary could be required.

Estate management company: why, how, what are the advantages?

The Estate Management company can be a great way to build assets between members of a family or working associates, however it has a cost involved. A study of the desired outcome is necessary to validate the financial arrangement as well as defining the roles of each person involved. Finally the company will need to be created before the start of any operation.