The repayment requirement will affect new mortgages in that people will have to look at cheaper housing than they otherwise would have needed. You simply need to go down in price to afford a monthly cost that includes amortization within your monthly budget.
This makes it even more important to keep track of all the costs associated with a mortgage, and so I thought I would go through the part that you usually do not really spend as much thought.
The loan-to-value ratio is a maximum of 85 percent
What is important to know is that you can borrow at most 85% of the value of the home. Something worth noting here is that you always calculate this amount on the amount that is the least of the value of the home according to valuation and the price you actually bought the home for.
This means that if you find a house valued at 4 million but where you have to pay 4.5 million for some reason, for example due to tough bidding, then you can only borrow at most 85% of just 4 million. Thus, you cannot get a mortgage loan that covers down what the property is actually worth.
At the same time, it is so unfortunate that if you do the opposite, find a house to buy that you can get for 4 million even though according to the valuation it is actually worth 4.5 million, you can still only borrow 85% of the purchase price of the bank. Thus, you cannot borrow more than the property is worth, nor can you borrow more than what you pay for it.
This is really only a problem when for some reason you pay more for the home than it is worth. If the price rises, it can be so bad that you simply get less of your loan as a mortgage (which is the cheap part that you would like as much as possible).
Top loans or regular private loans to cover the rest
The part of the money that you cannot get as a normal mortgage / mortgage loan you have to fix in another way. The two options that remain are to pay them in cash – ie with your savings – or to borrow in another form that is more expensive.
If you have bought a more expensive home, you are not likely to pay 15% of the home’s value / purchase price by cash. For a home that costs 4 million, it would be USD 600,000 and that is far from anyone who has such money lying or within easy reach. Even if you would have such money in the form of investments, it is not certain that you should use them to pay for that part either. This is the question if you believe that shares and other things that you have invested in can be thought to increase in value more than the cost of the loans would be.
In all cases, the most likely is that you will need to borrow part of the remaining 15 percent. You rarely borrow the entire amount, but you have to offer a certain amount of cash. This is to show that you have a reasonably strong economy that can handle a mortgage of this size. Usually the bank requires that you deposit at least 5% cash.
Important to think about the more expensive loan
If we assume that you could get a loan-to-value ratio of 85% (it is possible that you can not get more than 80% or similar but that is an individual assessment) and put 5% in cash, then you have at least 10% of the cost of housing that must financed through a more expensive loan.
Instead of a mortgage loan / regular mortgage, you have a loan here without collateral. It is basically a very ordinary private loan that you have to take. If you bought your home for 4 million, that would mean that 10% is USD 400,000, which you borrow in the form of a private loan with clearly more expensive interest rates.
If the interest rate for a mortgage is currently around 1.5 – 1.7% then the interest rate for a private loan is at least 3.25 – 3.5% and to get the very lowest interest rates you also need a really good economics and maybe even a co-applicant. Otherwise, you may come up a bit higher.