He had already mentioned participation up to 40% of a real estate project, as well as raising the eligibility ceilings. An extension of the deferral of monthly payments was also on the agenda, as well as the scope of the system for old dwellings located in all rural municipalities, instead of a shortlist of 6000 municipalities today. On the other hand the vagueness persisted as for the application of the PTZ + in the old one on all France. The veil is definitively lifted, yes first-time buyers will be able to use this lever to become the owner of a built dwelling, regardless of the geographic area.
What the 2016 zero rate loan will change for first-time buyers
Significant help to buy your first main residence
The measure of widening the PTZ + to the former throughout France is welcomed by real estate professionals. But it is above all the increase in the participation to 40% of the cost of the project which arouses the general applause of the whole chain of the profession.
Head of bank relations at Astro Finance explains it: “ the share of first-time buyers has dropped by 20 points since 2011, going from 58% of borrowers to only 38% in 2015. The zero-rate loan as ” it exists today in the old did not allow to bring back this type of borrowers: we had almost no demand for credit with a loan at zero rate in rural areas this year, because the current device is both too geographically limited, too complicated and with limited amounts in zone C ”.
State aid twice as large
Currently the amount of a PTZ + for residents of zone C cannot exceed 18% of the cost of the operation. Which cost is capped at $ 230,000 for a couple with 3 children, which allows them a maximum of $ 41,400 in interest-free financing. In zone A, participation amounts to 26%, while the ceiling is raised to $ 345,000. This leaves a couple with 3 children the possibility of borrowing $ 89,700 via a PTZ +.
But from January 1, 2016 they will be able to get more. In zone C with a 40% stake, their PTZ will reach $ 92,000, more than double. In zone A they can withdraw $ 138,000 to be reimbursed without interest. Note, however, that this calculation is based on the fact that the maximum cost ceiling will be maintained for next year.
Almost 2 times less monthly payments
Take the example of a family of 3 children, whose household income does not exceed $ 35,000 per year. In practice, they are therefore considered as a household with modest incomes. Today, however, they have the possibility of carrying out a building project in the old one for a value of $ 200,000. The State grants them a PTZ + of 18%, or $ 36,000.
Based on $ 16,000 in purchase costs, which includes the fees for the notarial study, transfer rights as well as file guarantee costs, there will therefore remain $ 180,000 to borrow. Given their financial situation, they can now obtain a 3% mortgage over 25 years.
However, their situation does not allow them to obtain a deferred reimbursement from the PTZ. Their monthly payments will therefore be 1041.6 $.
From January 1, 2016, if the basis for calculating the PTZ + is 40%, their interest-free loan will be $ 80,000. The purchase costs do not change, but they only have $ 136,000 left to borrow. The bank grants them a line of credit at 3% over 25 years, which with a postponement of the PTZ maturities of at least 5 years, gives them monthly payments of at least $ 645 for the first 5 years.
A real estate project achievable thanks to the deferral of monthly payments
One of the strengths of the zero-rate loan version 2015, is the postponement of monthly payments to 5.10 or 15 years, or even 20 years depending on the case. In the example above during the first 5 years the couple’s debt ratio drops to 22%. Without the postponement of the PTZ + deadlines, it showed at 35% which would tend to cool most banks.
President and founder of Astro Finance, is delighted with this measure: “This new version of the PTZ should allow a return of first-time buyers in 2016, both in the old and in the new, and thus give dynamism to the estate market. In a context of low rates and relative price stability, the widening of the PTZ is the missing element to allow the market to restart in 2016 ”.
Will the zero-rate loan replace personal contribution?
All banks consider the PTZ + as a personal contribution, which does not prevent them from asking their borrowers to pay the purchase costs from their own pocket. The latter must therefore have a capital of 8 to 10% of the price of the coveted property, in order to pay the notary’s fees, transfer tax, warranty fees and others.
In practice, banks prefer not to have to finance the entire value of the property. This is where the zero rate loan comes in, as it is considered to contribute to the value of the property. Thus it already allows households with capital only the cost value, to obtain a loan to buy their main residence.
But the longer deferral of monthly payments will help them more. Those of them who will be eligible for a 15-year deferral will further reassure the banks. Households with modest incomes will therefore particularly benefit from this measure.
In addition, a real estate project in the old at 200,000 $, implies the purchase of real estate at 175,000 $. The PTZ + is eligible under the old condition of carrying out work amount to 25% of the total cost of the operation. Thus, the necessary contribution will only concern the value of the property, i.e. a maximum of $ 17,500 in this case. The bank notes thanks to quotes signed by professionals, that it will therefore have to lend $ 157,500 for real estate which will be worth $ 200,000 at the end of the work.