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Getting a mortgage in Belgium

How banks lend for property purchases



When you’ve decided that you want to buy a certain property, it’s time to go to the bank and apply for a mortgage loan. There are many things to consider before, during and at the end of that loan.

Mortgage loan

When you take out a mortgage loan (NL: hypotheeklening FR: prêt hypothécaire) you are borrowing an amount of money from the bank and you agree to give up your property if you are unable to pay back the loan. The bank can then sell the property to repay for the debt. This is a guarantee the bank needs in order to give you the loan. The repayments are usually made over a period of 15 to 30 years.

Remember that a mortgage loan allows you to claim tax relief.

You can choose to sign a guaranteed collateral agreement (NL: hypothecaire volmacht FR: mandat hypothécaire) which is not really a mortgage loan, but allows the bank to put a mortgage on your house whenever they feel that you might not be able to pay back your debt. This can save you a lot of money since there is no actual mortgage, which means that you don’t have to pay any registration fees. There are still solicitor's fees, but these are a lot less then what you would have to pay for a normal mortgage. In this case you need to consider the fact that you will not be able to claim tax relief if there is no actual mortgage, so do the math on both situations before you decide.

If you want to borrow more than what your property is worth (to pay for registration fees or restoration, etc.) the bank will raise your interest rate.

It is mandatory that the amount of your monthly repayments is not higher than 1/3 of your net income. The bank will also take into account other things like your family situation, the stability of your job and the estimated value of the property.

Insurance

It might be a good idea, especially with high amounts, to get insurance for the loan. So if anything happens to you, your family will not be in trouble or be responsible for paying off your debt. This is called an insurance to cover the balance outstanding (NL: schuldsaldoverzekering FR: assurance solde restant dû) and makes sure that if you die during the course of the mortgage loan, the insurance will pay off your remaining debt.

Interest

There are 2 things that need to be decided when it comes to mortgage loans: whether you’re going for a variable (NL: variabele rente FR: taux variable) or fixed (NL: vaste rente FR: taux fixe) interest rate and how long your mortgage will run.

For the second decision, if you can repay the loan in 18 or 19 years, don’t go for the 20 or 30 year loan.

You could go for a variable interest rate because it’s lower than the fixed rate but this may mean that the repayment amount will get higher over time.

One of the advantages of a fixed interest rate is that you will not run into any surprises since you know how much you will have to pay every month. Also, if interest rates are low at the time of signing up, it’s best to go for a fixed rate.

Paying off your loan

If the market interest rate drops to a low level it might be a good idea to pay off your loan (NL: de lening afkopen FR: rachat du prêt). You can do this either through your bank or through another lending facility.


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