There is a widespread notion that the cash contribution for a home, such as a villa or condominium, has to be paid for with its own money, ie money that you have not borrowed but saved yourself. There is no such requirement. You can very well borrow for cash .
Cash contribution and mortgage ceiling
According to the regulation on the so-called mortgage loan, a private person who buys a home cannot mortgage the home through mortgages to more than 85% of the purchase price / market value. The remaining part must be paid in cash in the form of a cash deposit. In other words, it is not possible to get a mortgage without cash.
Most major banks and lenders have further tightened this requirement on a voluntary basis. The majority of banks operating in mortgage lending operate with a limit of 75%. What this means is that if the purchase price for a home is $ 2 million, the mortgage loan for the home cannot exceed 1.5 million. The remaining $ 500,000 of the purchase price must be financed in other ways.
Although many banks have set 75% as the limit for the mortgage loan, they are no stranger to offering a private loan that covers the difference between 75-85% of the purchase price. Whether or not you can offer such a private loan, which in practice can be compared with previous days’ top loans, or not, of course, is determined by your finances and the circumstances.
With a good economy, however, there is every opportunity to finance the purchase price at 85% with the bottom loan and the top loan. Thus, how much cash you have to finance in other ways is 15%. Namely, one bank cannot grant you a loan to finance the entire home purchase to 100%. In other words, you must apply to another bank or lender to apply for a loan that covers the cash deposit.
Banks and lenders offering loans for cash
There are a large number of lenders that offer you to borrow money with really good terms for a cash deposit through a traditional private loan or a bank loan. The majority of lenders offer loans of up to $ 600,000.
Respective lenders have their own terms, but basically you have to be at least 20 years of age, have a fixed income and lack payment notes to be considered for a private loan. Borrowing money without UC is usually difficult when it comes to larger amounts.
Risks of borrowing for cash
All loans run at interest rates and the more unsecured a loan is, the higher the interest rate will be. The interest rate on a mortgage loan is relatively low, because the bank has a security in the home itself. If you cannot repay the loan, the lender has the right to take over the property.
The interest rate on a private loan that you take to cover the difference up to 85%, ie the so-called top loan, is tested individually based on your finances.
For this loan, there is no collateral in the home, but you can usually expect a small discount because you already have a commitment in the bank. This is especially true if you have your primary bank account there and if you have your savings collected with the same bank.
For the interest rate on a private loan that you take to pay the cash contribution, you cannot receive any discount. In addition, there is the risk that the lender attaches a great deal of weight to your general loan ratio and is therefore restrictive with lending or requires higher interest rates. This type of loan is thus more risky for the lender to grant and issue why the interest rate is thus higher.
A private loan must be repaid through a certain number of installments over a certain number of years. With a slightly higher interest rate, the costs can be significant every month. Then you should also fulfill your obligations to the bank that granted you a mortgage loan and possibly also a supplementary private loan. The more you borrow, the greater the cost.
Be sure to calculate the costs properly before applying for a loan to ensure that you can afford to pay both the mortgage and the private loans you take. If you want to borrow for cash, also make sure to carefully compare prices between lenders as there may be large differences between the players.
How does the new amortization requirement affect?
The repayment requirement means that if you have a mortgage that exceeds 4.5 times your own annual income, the borrower needs to repay 1 percent of the loan, which can be difficult if you already have a strained private economy. The change will, above all, hit hard on young people who are about to enter into their first home purchase in, or near, one of the major cities in the country where prices are highest.
Calculation example new amortization requirement:
If you earn $ 35,000 a month, want to buy a condominium for $ 3 million and have the opportunity to pay $ 500,000 in cash, you must, according to the new requirement, repay $ 6250 a month. According to previous regulations, the amortization requirement was $ 4170 per month. From the above example, the cost of housing over $ 2000 becomes more expensive per month compared to the old system.
In other words, borrowing for cash can be an expensive story, and there is of course a risk associated with such a procedure. If you apply to the metropolitan regions, however, it can be difficult to collect the cash contribution through your own cash funds and then a loan to the cash contribution can be a good idea.
Although it may seem expensive to borrow for a cash deposit, it may be a good idea to set it in relation to other alternatives. Renting a home is usually a ruinous business, as the monthly cost you put in renting will never be refunded. It may be a good option in the short term and it will give you a roof over your head, but in the long term, buying a home can be a smart option.
On the other hand, you can equate a home purchase with a long-term investment, just as you do in securities or in a savings account. When you sell the condominium you will hopefully get back more than what you gave for it when the purchase was made. This way you will make a profit on your purchase. So it does not work with a rental right.
Borrowing a cash deposit can in some ways even be positive for your personal cash flow. Since you, through a loan, do not have to pay the entire cash contribution with your own funds, your personal finances will also not be hit as hard at one and the same time, but instead the cost will hit your finances over a longer period.
Over time, it will of course be more expensive to borrow given the interest rate the lender charges for the loan, but it is also something that will not affect your finances directly. Taking a loan to get money for a cash deposit is expensive compared to paying cash, but the total cost will be spread over the period the loan runs. Upon contact with your lender, you will be able to get more specific details about how expensive the loan will be compared to paying the cash contribution with your own funds.
The loan market right now
We currently have a negative interest rate situation in Sweden. This means that it is relatively cheap to take out a loan. At present, our partner banks have interest rates for private loans, which is the loan you take to finance your cash contribution, which starts at around 3% and extends to a maximum of just over 30%. Where the interest rate eventually lands on your own account depends on several different things such as your credit rating and ability to pay in combination with how high the amount you borrow. Since the lender does not take any collateral in connection with the loan, the interest rate is instead set to a higher amount.
Assume that you take out a loan for a cash contribution of $ 300,000 and that the effective interest rate is 6.11% and that the term is 7 years. This is a relatively common example and borrowing at a cash contribution of $ 300,000 is not at all unthinkable. The total cost of this loan would then amount to $ 367,532. If this is eliminated during the term of the loan, you will receive a total monthly cost of $ 4,375 where the interest cost itself is only about $ 804, which is not at all unreasonable in any way.
The difference between nominal and effective interest rates
When you are looking for the best loan terms, you will most likely encounter the notions of nominal interest rates and effective interest rates. These two can be difficult to know the exact difference if you are not fully familiar with how the loan market works. In broad terms, it can be said that the nominal interest rate is the base rate charged by the lender.
For almost all loans, however, there are additional fees, such as setup fees, management fees and so on. The cost of the loan after all the extra fees have been applied is called the effective interest rate. Thus, the effective interest rate is what you pay for your loan and thus the indication you should keep an eye on when comparing loans with each other.
We collaborate with some of the largest banks, credit institutions and loan intermediaries in the market. These include: Lendo, Consector, MyLoan, Bynk, Santander, Compricer and SEB, to name a few. Through these you can be assured of fast, safe and efficient handling.
You will receive personalized service and advice to find which loan arrangement is best suited for your goal according to your circumstances. If you also use prominent loan intermediaries, all you usually need is a credit report only to find out a large number of banks’ loan offers. If, on the other hand, you were to apply for loan offers from several separate banks on your own, this would mean that a separate credit report will be taken per application you make.
In the long run, this can result in a lowered credit rating, which in turn, ironically, makes it more difficult for you to get advantageous loan offers.
Although it may seem difficult to get the financing of their home together, there is every opportunity in the world to be able to buy your own home. A cash contribution for a dwelling of $ 2 million comes to $ 300,000. This is, as I said, the 15% that you cannot finance through the same bank that has already granted the mortgage of $ 1,700,000. Many people who have these $ 300,000 in their own cash funds usually choose to finance the cash contribution without loans. However, few have access to such large sums without lending.
The loan market has, of course, adapted to this need and many players offer private loans in order to cover the gap that arises between the mortgage and the total purchase price for the home. In other words, there are no reasons to worry about not being able to take a private loan for cash. The conditions for this loan are set according to your own financial situation.
If you have a fixed employment, high income and a low loan-to-value ratio before, combined with a register without payment remarks and a debt-free history at Kronofogden, you probably have good chances of being able to get a private loan for cash on very favorable terms.
When you are then considering researching the loan market to find the best terms for you, it is first and foremost to contact lender brokers. Loan brokers help you collect loan offers from several large banks. This is usually done by doing only one UC, ie a credit report. The fact that only one credit report is made does not affect your credit rating, which is very advantageous.
Finally, the conditions that you can be offered largely depend, or entirely, on the financial conditions you have yourself. Of course, it differs from lender to lender, but with a good personal finances you get a long way in the hunt for the best loan.