What is a Mortgage Loan?
Buying a home is not usually a cheap deal and therefore a loan is usually required to be able to manage it financially. Most of us will someday be involved in a purchase of this kind, whether it be a villa, a townhouse, an apartment or similar.
Although this is a cheap form of loan compared to the other common types available out there, it is still a matter of large sums to be paid out monthly. When a loan can amount to several million USD, even a low interest rate will be many USD to pay.
The purchase is divided into parts
If you calculate a little quickly then a loan of 2 million with an interest rate of 4% means a cost of over USD 6,500 per month, then it comes to a deduction of 30% on this amount, but overall it is still a lot of money.
Since it is about so much money, it is important to keep track of what applies when you buy a home and want to borrow for it. This article is supposed to answer this question precisely as we are going to go through the usual parts of a mortgage here.
Three important words to understand when buying a home are mortgage loans, top loans and cash deposits. Even though the cash contribution is not a direct part of the mortgage itself, it is still an important part of why we raise this.
Mortgages / Mortgages
This is what really is the mortgage itself. When you buy a home, this has a price and a value that is at a certain number of kronor. From the value it is then possible to borrow up to 85% with the housing as collateral, this limit was set a few years ago to try to gain control of the market.
Simply put, you can say that you who want to buy a home for USD 1,000,000 have the opportunity to borrow USD 850,000 at most with the home as collateral / mortgage. However, there is no requirement that the lenders agree to this loan ratio, but if there is no major problem with the home, it should be no problem to find a lender who agrees to this.
It is advantageous for you that you can borrow most of the housing as this is the loan that has the lowest interest rate. When you read mortgage rates for the mortgages of the different lenders, it is always the bottom loan that you talk about. We will also talk about interest later in this article and then we always refer to the mortgage loan.
When you buy a home, it is standard that you first pay in cash. This is to show that you have the capacity to manage to buy the home. The cash contribution is usually at 10% of the purchase price and is often paid for a while before the actual purchase is made. There is no requirement that cash contribution must be paid purely by law, but it is a normal requirement.
Thus, for this part of the cost you cannot have the housing as collateral and the very idea is that you should have saved money that is sufficient to cover this sum. However, there is no requirement that it must be saved money that you use to pay the cash contribution. Therefore, it is common, for example, that you use money that you receive when selling the home you live in at the moment as a cash contribution. However, should it be that you do not have money in any way for a cash bet, there is nothing that will prevent you from borrowing money for this.
This then becomes the question of a private loan and it is important to remember that, first of all, there are no guarantees whatsoever that you can borrow more money from the lender you intend to apply to. Of course it is possible to use another lender if they now want to lend money, but then it is important to think carefully about the second point and that is the cost. Private loans have a higher interest rate than mortgage loans, which is why it becomes a relatively high cost compared to how big the loan is.
Thus, it is advisable to use money saved for cash, but there is no requirement that you do so. One thing to add is that there is absolutely no obstacle to paying a larger sum in cash. If you have money for 50% of the cost, there is no problem at all to pay this.
We have now gone through which one the bottom loan and cash deposit plays in a purchase and loan. If you have not previously saved money for more than the cash contribution or choose to borrow for this particular, there will be a number of percent left. If we say you get 85% on loan and pay 10% in cash, there will be 5% left and it is for these remaining money that a top loan comes into question. Nor is there anything that says lenders must approve a loan-to-value ratio of 85%, so it may very well be that you have to have even more percentages in a top loan.
What distinguishes a top mortgage compared to a mortgage is that this loan does not have the home as collateral. Which means that the risk is greater for the lender on this part of the loan, which makes the interest rate higher. It is actually the same type of loan as a private loan so the interest rate will be similar.
Something that distinguishes a top loan against a private loan is that the maturity is often longer. The lenders are aware that you have to repay the mortgage loan itself and that it is the question of large loans, therefore the maturity can be up to 20 years for the top loan. Compared to the mortgage, this is a short time, but it is so long that the payments per month do not become immediately large.