The choice of duration will depend on the repayment capacity of the borrower but also on his will in terms of monthly payments not to be exceeded.
Duration and mortgage: principle
The mortgage is a financing allowing to buy a real estate and / or to finance works inseparable from the building, the minimum amount of this loan is 75,000 dollars. The mortgage will be granted to the borrower subject to the establishment of a guarantee, which may be a surety or a mortgage. It is also necessary to define the repayment duration in the context of a mortgage, it is on average at least 5 years and can extend over a maximum duration of 30 years. Note that some mortgage credit institutions offer maximum terms of 35 years, under certain conditions.
The choice of duration is important, the borrower can express a wish regarding the duration and the bank will ensure that this repayment duration is compatible with the finances of the borrower. A study will be carried out to determine its repayment capacity and propose a minimum duration as well as a maximum duration.
Duration of mortgage: between cost and monthly payment
The duration of repayment plays an important role on the cost of credit because the longer the duration will be and the higher the interest rates will be. To this will be added the maximum repayment capacity of the borrower each month but also his wish in terms of monthly payments. Some households will set a capped monthly payment not to be exceeded, the interest being to preserve a certain room for maneuver in the household budget and to be able to better cope with the unexpected. This limit also makes it possible to devote part of its borrowing capacity to carry out new projects.
All these elements will therefore be taken into account, but it is also necessary to take into account possible zero rate loans or even the devices facilitating access to property. The bank will have to carry out a smoothing of loan in account of the durations two loans, the traditional real estate loan but also the loan at zero rate (or employer loan). The age of the borrower can play a role because the banks impose an age of end of loan (often more than 90 years) and will also take into account the retirement, for example to offer a loan to tier.
Find out and be advised on the duration of a loan
The duration of the mortgage is not always easy to anticipate because it will condition the obtaining of financing, the amount borrowed but also the monthly payment of the loan. It is therefore necessary to make some funding estimates to obtain proposals and choose the methods best suited to his personal situation. With all the expertise necessary to support you on your real estate project, a point may be made over the duration of the mortgage. The simulation is free and without obligation.