With us, you can learn everything you need to know about mortgages to make an informed decision. You can also find and compare the market’s largest and best banks and credit institutions for mortgages here.
Please note that the final interest rate is set individually by the bank
Buying a house means that for most people you have to borrow a large amount of money in the form of a mortgage. The total interest cost that you pay for a mortgage is often high. It is therefore important when borrowing money to compare lenders and different banks.
When you buy a new home with your own money, you need to put in cash and then you usually have to take out a mortgage for the remaining part of the purchase price. Buying a home is one of the most important financial decisions we have in our lives. Against this background, it is therefore of utmost importance to find the best mortgage loan in order to make the best possible deal.
How much can I borrow?
There are restrictions on how much you can borrow for a home purchase. There are several laws that limit how much you can borrow. The lenders, of course, also have their own rules that determine how much each customer can borrow, and at what interest rate.
There is legislation that says that banks must not lend more than 85% of the value of the home. If you need to borrow more money than you can not do so in the context of a mortgage. The alternative is to take a private loan or use their savings money. The remaining 15% of the value of the home is usually called a cash contribution and is thus something you have to finance in a different way than with mortgages.
Let’s say you want to buy a home for SEK 2 million. This means that you can only borrow up to 85% of the value of the property. In our example, there will be 1,700,000. In this case, according to the legislation, you must put a minimum cash bet of SEK 300,000, which is not a small sum. This means that many people choose to take out a private loan in order to finance the cash contribution.
In order to reduce the Swedes’ debt-to-equity ratio, the Financial Supervisory Authority wants to introduce a debt-to-income ceiling that limits the size of loans. No definitive decisions have been made, but several large banks have implemented a version of FI’s recommendation.
Debt ratio is simply a tool to see how indebted a household is. The debt ratio is calculated by dividing a household’s total loan by total annual income and then reversing the ratio by 100 to get it as a percentage. A household with SEK 1,000,000 in loans and an annual income of SEK 300,000 has a debt ratio as follows:
(1,000,000 / 300,000) * 100 = 333%
The household thus has a debt ratio of 333%, ie they have 3 times as much loan as their annual income. The debt-to-debt ceiling means that the banks will not let borrowers take loans that cause the household’s debt-to-income ceiling to exceed the “ceiling”. Right now, the various banks’ debt-to-income ratios are between about 400% to 600%.
Housing is a security
The housing market is constantly and constantly a hot topic in the news. Prices that go up and down please many but worry others. A big reason why this is so interesting to many is because a large part of the Swedish population has mortgages, and all that is usually quite extensive.
Because of its size, mortgages are something that follows people’s lives for a very long time. Many do not pay off their mortgages until very late in life.
Compared to private loans, and perhaps mainly fast loans, mortgages are very different. Mortgages include large sums of money, have long maturities and run low interest rates. Because of its size, this loan is not something that banks and credit institutions issue easily. There are therefore many requirements and criteria required to take out a loan. Or even get a loan with good terms.
When you take out a mortgage, the bank or credit institution gets a security in the object being acquired, that is, the villa itself or the tenancy right. If you cannot pay interest and repayments, the bank has the right to take over and sell the house at an executive auction in order to get back your borrowed money. That is why you usually say that the bank owns the home until the last repayment has been made.
At the same time, the collateral, or the pledge in another word, means that the lenders dare to lend larger sums and that the interest rates for a mortgage loan are significantly lower than those that apply to, for example, a private loan / loan.
Find the best mortgage loan
There are several steps that every potential home buyer should go through before deciding to take out a mortgage.
Top and bottom loans
Normally, a mortgage loan consists of two parts, one a bottom loan and one a top loan. Banks split your mortgage because they have your home as collateral. If it turns out that you cannot pay off your loan, the bank will, as I said, sell the home. But it is not certain that the bank will get back all its money in the sale of the loan. The part of the loan they are sure they can get back is called a mortgage loan . The amount they are unsure of getting back is called top loan and has a higher interest rate. In addition, a top loan is usually given at variable interest rates and often has higher requirements for amortization.
You are not forced to divide your loan into top and bottom loans. If you can pay a larger part of the loan, just over 25% of the purchase price, with your own money no top loan is needed. The bottom loan is between 70% and 80% of the market value depending on the bank. The bottom loan, which in turn can be divided into several smaller loans in order to be able to bind the loans at different interest rates, always runs at a lower interest rate than the top loan.
Calculate the size of the mortgage
Before it should even be considered to take out a mortgage, you must decide how big the loan should be. You must also know if you will be able to afford to pay the down payment and the coming interest rates and repayments.
Remember that you can only borrow up to 85% of the housing price with a mortgage and have to take the rest as a private loan or save the money yourself. A home of one million requires that you save at least SEK 150,000 before the purchase. Then you do not expect extra costs such as moving costs, furniture and renovations.
Borrow to the cash deposit
To finance the cash contribution you can apply for a private loan. The private loan does not require any collateral, so you do not need to justify what you have the money for. You can borrow up to SEK 400,000 with a private loan, which means you can borrow a cash contribution for a house that costs just over SEK 2 million.
Note, however, that not all banks allow you to take out both bank loans and mortgages in order to finance the home purchase. However, there are ways to circumvent this by taking out a mortgage loan from one bank and then taking out the bank loan from another.
However, it is important to try to repay the maximum on the private loan, both because it is more expensive in terms of interest rates and because it is less than the mortgage. It is therefore faster to get rid of a monthly cost if you start to repay the private loan.
Compare different lenders
Many people choose to take their home loan from the same bank they already use as their primary bank. There may be a lot of benefits in doing this, but it never hurts to compare the different players to find a better deal. Here at Oliver Twist you can of course see and compare the lenders and their interest rates. Click on “Apply” or the company logo to go directly to the lender’s website.
Determine your credit rating
Your credit rating is broadly the same as your ability to pay off your debts. Dignity is based on many factors such as finances, living situation, housing and previous payment remarks. Obtaining loans with payment notes when it comes to mortgages is often difficult.
If you have a high credit rating, you will be able to negotiate a lower interest rate as the lenders consider that you will be able to repay your loans. When you apply for a loan, the lenders will make a credit report on you so that the bank can get a picture of your repayment option. Many banks make use of the Information Center, which makes it difficult to borrow money without UC for a home.
It may therefore be a good idea to do this yourself in advance so that you can improve your creditworthiness well in advance.
Apply for a loan pledge
A loan promise is a promise from the bank about how much you can borrow. It is also an indication of what you can afford to buy. You do not need to tell the bank what housing you intend to buy, but it may be good to check how much the housing may cost. The bank may have certain requirements when it comes to loan commitments. For example, they may require proof that you are able to fund the 15% required for the down payment. A loan promise is valid for 6 months, but you can also apply to extend it.
A direct consequence of the discussion surrounding the debt-to-income ceiling is the amortization requirement that was introduced on March 1, 2018. It aims to ensure that the loan-to-value ratio is generally very high in Sweden, as we mentioned above. Broadly speaking, the new amortization requirement means that households that have borrowed more than 4.5 times their annual gross income need to repay 1% of the mortgage each year. 1% doesn’t sound like a bigger sum but the fact is that it affects more than you think.
In addition to this new amortization requirement, the previous amortization requirements still apply. The previous amortization requirements stipulate that housing that is mortgaged with at least 50% must be amortized by a 1% annually. Furthermore, housing with a loan-to-value ratio of at least 70% must be amortized by 2%. When you combine the new repayment requirement with the old rules, which will continue to apply, many households can be forced to repay 3% annually on their mortgage.