Picture this: you've found the house of your dreams and you're about to take out a mortgage. Do you know how much money the bank will lend you and how much in savings you need to take out a mortgage? This article covers everything, so take note!
How much money can I request for a mortgage?
Although you can take out a mortgage for 100% of the house price, most banks do not issue this type of loan. Generally, banks will only grant 80% of the house price to be mortgaged. This means that the remaining 20% of the house price must come out of your own savings.
How much money do I need to take out a mortgage?
In addition to the 20% of the house price that banks do not usually grant with the mortgage, one must also consider the costs associated with the buying process. These costs are usually around 10% of the house price. In other words, to buy a house and take out a mortgage, you need to save approximately 30% of the house's value.
Can I take out a mortgage without savings?
It is possible to take out a mortgage without savings. However, this is not recommended. Most banks do not look favourably upon this type of operation, as it involves more risk due to the high level of indebtedness. However, this does not mean you cannot get a mortgage without savings.
Here are some options that can help us to achieve this:
Having a guarantor
The easiest way to get a mortgage if you do not have 30% of the house value saved is to have a guarantor. A guarantor is a third party who agrees to be responsible for the mortgage debt in the event of non-payment. If the mortgage holder cannot pay the instalments, the bank will turn to this third party to pay them.
Rent-to-buy schemes
Rent-to-buy schemes are another way of buying a house and taking out a mortgage without savings. This option allows the buyer to rent the house they want to buy for up to five years. After that time, they buy the property, discounting the rent they've paid from the purchase price. Less money is therefore outlaid, making it easier to access a mortgage, as the full purchase price is not needed. To access this option, you need to enter into a rental contract with the option to buy when you start renting.
100% mortgages
100% mortgages offer full financing for the purchase of the property. Due to the high risk of non-payment that they imply, fewer banks now grant them. However, they are certainly a way of being able to afford buying a home without needing previous savings to apply for the mortgage. In any case, you will need 10% of the property price to cover the administrative costs.
100% mortgages involve a very high level of indebtedness, which also means a high risk of non-payment, resulting in a greater possibility of repossession.
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