The lender is refusing to finance your project because your Global Effective Annual Rate is exceeding the Usury Rate !!!
Let’s understand what this is all about …
The Usury Rate (aka “Taux d’Usure” in French) was implemented to protect borrowers against excessive mortgage rates which could place them in a difficult financial situation.
The Ministry of Economy, Finance and Industry calculates the rate. It is published quarterly by the Banque De France and varies according to the type of loan (consumer credit, mortgages, revolving credit, etc.), amount borrowed and duration.
For the most common loans (Duration of 10 years and less than 20 years), the current usury rate is 2.40% (Q2 2022).
When applying for a mortgage, the lender must calculate all the costs related to your financing and determine the Global Effective Annual Rate (aka “Taux Annuel Effectif Global” in French). Its value must not exceed the value of the Usury Rate for the mortgage to be approved.
The method of calculation of the TAEG is defined in the appendix to article R-313-1 of the Consumer Code. It is expressed as a percentage calculation according to the equivalence method with an accuracy of at least one decimal point.
- The mortgage interest rate (nominal rate)
- The administrative fees (Bank application fee + Brokerage commission)
- The cost of the mortgage life insurance
- The mortgage guarantee fees
- All other costs imposed for obtaining the credit (Monthly bank account maintenance charge if you are asked to open a bank account for example).
Costs not included :
- The taxes on the transaction
- The notarial deed fees
- The real estate agency fees
Our dedicated team of brokers can determine your mortgage capacity and review the efficiency of your financing to ensure you are receiving the right mortgage solution for your purchase in France