A mortgage is a loan used by a buyer to acquire a home. A mortgage is usually issued for the purchase of a home, but it can also be obtained for home renovation or investment.
A mortgage is essentially a mortgage. The lender grants the loan and uses the apartment as collateral for the loan. The lender thus reserves the right to housing if, for any reason, the debtor fails to fulfill its obligations.
In Finland, mortgages are mainly granted by large commercial banks. Banks provide mortgages to individuals or companies looking to buy an apartment or property.
The characteristics of a home loan, such as loan size, loan length, interest rate, loan repayment method and other characteristics may vary considerably.
Why apply for a mortgage?
For many people, buying a home is not only a dream, but also the biggest and most important purchase decision. Renting a home is a very typical form of living before buying a first home. So why is a mortgage worthwhile?
When you rent, you pay for the apartment to the owner. If, on the other hand, you take out a mortgage and buy your own home, you repay the loan and raise capital for yourself.
In many cases, the monthly cost of housing can also be lower than the rent. If the repayment of the mortgage and the housing fee charged by the housing association are less than the rent, buying a home is an economically viable decision.
Since borrowing is one of the biggest decisions in life, you should plan carefully. There are many different, many aspects of home loans that you should be aware of.
Conditions for a mortgage loan
In principle, most retail customers can get a home loan as long as the income level is high enough and there is no major disruption in credit information. Banks pay attention to how well the borrower has handled their finances in the past.
Banks are most sympathetic to customers who have a stable and ongoing employment relationship. However, this is not always a prerequisite for a loan if the assets and solvency are otherwise demonstrable.
Because the bank always makes a loan decision on a case-by-case basis, it is a good idea to prepare your loan negotiations carefully. Often the lender wants detailed information about the applicant’s finances.
Applying for a mortgage in practice
It is a good idea to reserve information on your income, assets and liabilities for the conference. Your bank will also check your credit information, so if you have any notes, you should be prepared to find out. Often, small debts that are a few years old are not a barrier to getting a loan.
Whenever you apply for a mortgage, the financier wants to know the applicant’s current obligations. So, when you collect information on your existing loans, it is easier for your bank to make a valuation.
The bank is also interested in the applicant’s funds. For example, if you own a portion of a property, summer home or plot of land, this can have a positive effect on your loan application. Equity holdings and securities holdings are also worth exploring.
Loan Negotiation Checklist, What to Include?
- Your latest pay slip, at least three months
- Information on holdings: real estate, stocks, savings, etc.
- Estimate of monthly expenditure
- Proof of current loans
You must go through the loan negotiations before making a home offer. This allows the bank to make a loan commitment, a decision about how much they are willing to finance your purchase. The loan promise does not obligate you to take out a loan yet.
In general, the bank requires about 10-20% self-financing. So if you want to buy a home that costs € 200,000, you should have at least € 20,000 in cash or assets. Often banks have a handy mortgage calculator that makes it easy to rotate numbers. If the amount in question is not yet in your account, your bank may require you to save some time.
Mortgage interest rate
Like other loans, the mortgage is also paid interest. The interest rate is determined by the lender and tied to the loan amount. Mortgages granted in Finland and elsewhere in Europe are tied to a general interest rate, such as Good Finance. Good Finance is the common reference rate for the euro countries, on the basis of which banks lend money to each other.
The mortgage borrower becomes familiar with the Good Finance interest rate and is usually used as a reference rate when borrowing. Often a loan is linked to a 12-month Good Finance, but one, three or six month interest rates can also be used, which means that the interest rate of the loan is reviewed more frequently.
In addition to the Good Finance rate, the bank adds its own margin to the interest rate. This varies from customer to customer. Banks determine the level of risk for each customer and each item, and charge a loan margin based on these.
So the mortgage rate always depends on your personal situation and your finances. When considering a mortgage, it is advisable to calculate the costs accurately, for example, using a loan calculator.