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Month: March 2020

How much equity is needed for mortgage lending?

The issue of equity inevitably affects you as a borrower sooner or later. It is fundamental for the amount of a loan and thus the total cost of the loan. Before discussing the required amount of equity, the term should be explained as such.

1st component: debt

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Your real estate financing always consists of two components. The larger part is debt. This is a loan that is usually issued by a bank and attracts interest accordingly.

2nd component: equity

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In addition, as the client, you also contribute your own financial resources to the financing. These are then currently available assets, ie savings, and reserves of recent years.

This does not necessarily have to be in the form of cash or credit on the savings account. Fixed-interest securities or gold coins are also included in equity. Shares, bonds, and fund units should also be taken into account, but it should be noted that these may fluctuate in value between the time of planning and that of borrowing.

The amount of the loan

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Logically, the required amount of the loan is the smaller the larger the equity capital. Interest rates also decrease with your available capital. It is therefore generally necessary to raise as much equity as possible for mortgage lending. In general, this part remains relatively small, but most builders are just at the beginning of their professional future.

Do not worry, that’s not a big deal, but equity should reach a certain minimum level. In the case of mortgage lending, the share should be between 7.5% and 30% so that you can assume sustainable financial viability.

It sounds relatively much at first glance, but where the future property serves as security. So how does this scale come about? Banks simply do not want to grant loans for the full amount of property. If the insolvency of the borrower ceases, the bank will auction the deposited security. It rarely comes out a market-driven price, deviations down are the rule.

Do I get a real estate loan even without equity?

Do I get a real estate loan even without equity?

Now, if the loan was granted without equity and thus goes over the full amount of the actual market value, the bank has a fairly large so-called “blank share”, that is not sustainably secured part. It follows either that is not funded or the interest rate increases.

It is important to note that the amount of security is not based on the actual purchase or construction price. The bank compiles its own report and thus determines the market value of the property.

Then she measures the interest rate. As a rule, however, the two variables hardly differ from each other. However, it is increasingly common for regions that have risen sharply in price that the banks are making clearer markdowns.

Exemplary equity account

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An example should clarify how the required amount of equity is calculated explicitly:

The price of your property is 500,000 USD. Consequently, you need to finance your property financial resources in the amount of just this 500,000 USD. Since you are absolutely creditworthy, visit your bank and discuss the formalities.

The bank will now determine the actual market value of the property. And then the so-called mortgage lending value. This is the sustainable value for the bank including a haircut.

This is, for example, in an appraisal at 480,000 USD, which is why the bank is willing to give a loan in the amount of 480,000 USD * 80 percent = 384,000 USD in good interest. At 60% this would be much lower.

The difference between credit and construction price is $ 116,000, which you now have to cover with your equity or finance more expensive, or some banks charge a more expensive Mischzinz on the total sum.

In some federal states, there are also regional funding institutes that offer these “subordinated” loans at fairly good interest rates. As an independent financial service provider, we are happy to advise you on such questions!

Do you still have questions about equity? Or would you like more information on insurance, mortgage lending, financing, grants or similar?

Home Loan Insurance With Job Loss

Job loss is not always easy to anticipate, but on the repayment of a home loan that can extend up to 30 or even 35 years, it is advisable to include this guarantee in your borrower insurance.

 

Loan and home loan insurance: losing your job

home loan

Most borrower insurance includes basic guarantees such as illness, incapacity or even death, guarantees linked to the borrower’s state of health but the loss of employment or more precisely unemployment is not always of the guarantees offered. It must be noted, however, that we are operating in an economy that is still not very stable, professions are no longer guaranteed for life, especially in certain fields which are more sensitive to price changes: industry, services, agriculture.

Including unemployment insurance is, therefore, a choice of anticipation and above all a reasoned choice because it is difficult, even in the safest professions, to be assured of having a profession for life. The addition of this insurance will only result in a few euros more each month on the monthly payment, insurance which can be concluded at the time of the subscription of the mortgage or even after the signature of the contract, at the time of the renegotiation of the contract. insurance (termination for one year or annually).

 

How to take out unemployment insurance with the mortgage

There are several ways to take out unemployment insurance, it can be done with the bank that offers the mortgage, this allows everything to be included in the same contract and avoids soliciting other organizations to obtain offers, however, better borrower insurance can hide from the competition, which is worth raising and studying.

If the mortgage has already been signed, it is possible to change insurance during the first year of subscription, at any time, or to make this change on each anniversary date. To do so, simply contact an insurance company and file a borrower insurance application, taking care to specify the addition of the job loss guarantee.

 

Simulate job loss insurance

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It is possible to simulate job loss insurance, by taking over the guarantees identical to those present on the contract offer received or to the mortgage loan contract already signed. It suffices to specify the nature of the guarantees and the amount of the loan to be insured, as well as the details relating to the financial situation of the borrower. After validation of the request, you will receive several insurance proposals from institutions specializing in borrower insurance, so it is easy to compare contributions and choose the best offer.