Not more than 85% of the value of the home. This means that if the housing costs 2 million, at least USD 300,000 is required for the cash contribution and the remainder you can borrow with the housing as collateral.
Of course, when it comes to how much you get to borrow in total, income is important, but there are also other important factors that come into play. Good Credit explains the most common concepts.
For starters, your borrowing space is limited by the so-called mortgage loan. This applies to mortgages taken after October 1, 2010, and introduced at the request of the Swedish Financial Supervisory Authority.
It was thought that mortgage lending in Sweden had increased too much and the idea of the mortgage ceiling was to slow down the price trend for housing. Previously, you could sometimes borrow up to the entire value of the home from one and the same bank.
After the mortgage ceiling was introduced, the mortgage may be at most 85% of the value of the home, this is what is called a mortgage loan. In the last 15%, as a buyer, you have to stand for yourself, which is called cash installment or down payment.
If the home is worth USD 3,000,000, the home loan can thus be USD 2,550,000 at most. The cash contribution will then be USD 450,000. In practice, this means that the purchases must save money. But it is also possible to borrow the investment with a private loan.
In order to slow down the housing market’s price rally, the amortization requirement was introduced. It is based on the loan-to-value ratio and applies to loans taken after June 1, 2016. The loan-to-value ratio is a way of measuring how mortgaged the home is.
You can calculate the loan-to-value ratio by dividing the total loan amount by the present value of the home. If you have a loan of 500,000 and the home is worth 1,000,000, you will then have a loan-to-value ratio of 50% (500,000 / 1,000,000 = 0.5).
The repayment requirement means that a mortgage with a loan-to-value ratio of 50-70% must be repaid annually with at least 1% of the loan amount. If the loan-to-value ratio is greater than 70%, the loan must be amortized by at least 2% of the loan amount.
This requirement for repayment affects how much you can borrow since the banks need to take into account that you must be able to repay the loan at least the required rate.
How much can I borrow based on income?
A number of banks have now also introduced a so-called debt ratio ceiling. This means that there is a ceiling on how large the mortgage loan may be based on your household’s annual income. It is common for you to borrow at most about 4-6 times the gross income for the household.
For example, if you earn USD 350,000 a year and your partner 300,000, your household has a gross income of USD 650,000 per year. The debt ratio ceiling then gives you the most you can borrow USD 2,600,000–3,900,000 depending on the debt ratio that the bank you want to borrow from uses.
How much you can borrow based on your salary is not only determined by your income. Your expenses also play a big role. If you have ongoing expenses, parts of your income are already tied up. Banks take into account hundreds of factors, where capital deficits are one that is important. A high capital loss deficit simply means that you pay a lot of interest fees per year.
If you earn USD 30,000 after tax and have ongoing expenses such as car costs, other loans, food and so on USD 10,000 each month, then you have a disposable income on what is left – USD 20,000. In practice, this type of analysis is much more complex.
Benefits of comparing the banks
When you lend to a home, you should always count on loans, then compare the banks. You should also do this if you want to take a private loan, for example, a cash deposit. All banks specialize in different types of customers. It is therefore not possible to say that one bank is better than another when it comes to loans. Therefore, it is important to compare different loan offers to find which bank suits you best!
If you as a private individual go to several different banks to compare the terms, they each take credit information on you. This affects your credit rating and can impair your ability to get a really low-interest rate.
If you choose to compare with Good Credit, only one credit report is made. The service is completely free of charge and you do not commit to anything when you make a comparison. Instead, Good Credit gets paid directly by the bank or lender when we help them get a new satisfied customer.