The challenges of home ownership in Belgium are numerous, particularly for young people who face high real estate prices and interest rates that make home acquisition more difficult. To meet this need, some financial institutions offer a 40-year mortgage loan. This offer could be a solution for first-time buyers, but it also comes with limitations that should be carefully considered.
A tool for accessibility for first-time buyers
This 40-year loan is characterized by lower monthly payments, essential for young buyers on a tight budget. For example, a €300,000 loan with a competitive fixed rate of 3% costs €889 per month over 40 years, compared to €1,187 for a 25-year loan.
This difference of nearly €300 per month could provide young people with much-needed relief, for whom the repayment burden is often the biggest obstacle to home buying.
Strict conditions for a longer loan term
To secure this new credit option, several conditions are required. The financing cannot exceed 80% of the property’s value, requiring a 20% down payment. The home must also meet strict energy efficiency standards.
Calculating the actual cost of a 40-year loan
Although monthly payments are lower, extending the repayment term generates a higher total cost. Take a €300,000 loan, for instance: over 40 years at 3%, total interest amounts to approximately €215,498, compared to around €126,790 for a 25-year loan, a difference of €88,707. The mortgage life insurance will also be more expensive, and the mortgage will need to be renewed after 30 years, incurring additional notary fees. Additionally, most borrowers adjust or pay off their loan before the end, as their life circumstances evolve, making it particularly important to anticipate such a long-term commitment.
Properly preparing your real estate project
This 40-year mortgage loan is an option re-entering the market, aimed at addressing some of the home access challenges for young people in Belgium. It offers reduced monthly payments but imposes conditions and a higher overall cost.
By the Way Advice:
Before embarking on a real estate project, contact your bank and a credit broker to determine:
- The personal funds you will allocate to this investment,
- the maximum purchase price of the property (also taking acquisition fees into account),
- your repayment capacity.
