Who gets a home loan from the bank today? Photo: Shutterstock
In today’s economic climate, where interest rates have reached near record highs and uncertainty has become the new normal, buying a home has become a much more challenging task for many than it was just a year or two ago . However, the purchase and renovation of properties will continue even in more difficult economic times.
According to Catlin Vatsel, head of the real estate mortgage department at LHV, the increase in Euribor has also affected the situation of borrowers, making it more expensive to borrow money. “On the other hand, the risks and opportunities of those who take loans currently are very well assessed, because for them the price of money will one day become more favorable,” he said.
According to Vatsel, many fewer properties are purchased today, the prices of which start from half a million and more, but transactions of up to 250,000 euros are still quite common. He gave three examples of people who are being given home loans today.
Who can get a loan today?
Example 1
Kristi’s gross salary is 2,093 euros, of which she receives 1,615 euros. Since Kristi has no financial obligations, she also recently paid off her credit card balance and, after consulting with the bank, they arrived at such a result that Kristi can afford a property costing up to 130,000 euros. This is provided that you have 15% self-financing, i.e. 19,500 euros.
Kristi has been looking at real estate offers for about a month and a half and, according to her, she can currently buy a 2-3 room apartment in Tallinn on Mustamäe, Õismäe or Lasnamäe or, if she is lucky, a 2-room apartment. apartment in an old building in the center of Tallinn. Since Kristi has roots in Tartu, she is also considering purchasing an older house near Tartu, also in the price range mentioned above.
Example 2
Helen and Martin, an unmarried couple with two school-age children, have been living in a rented apartment for a long time and dream of having their own home. They both took on extra jobs and raised some of their own funding in a couple of years. Their income, including family allowances, is around 3,500 euros per month. The family has a credit card and the car is purchased. They have been looking for apartments for more than a year and will make a decision soon. The bank promised them 177 thousand euros, provided that there is 15% self-financing. For this amount they can buy a 3-4 room apartment in Tallinn or a 4 room house in Harju county.
To refinance or not?
According to Vatsel, we can see that people are increasingly interested in refinancing. “This means that the existing mortgage is transferred to another bank that offers better conditions,” explains Vatsel. “At the same time, when refinancing, it should be borne in mind that additional costs may be incurred during the transition phase, so it is worth concluding a loan agreement with the new bank today, and with the old bank
communicate your desire to sell the loan three months in advance. In this case there are no additional costs. The loan will be paid to the old bank after 3 months have passed.”
Example 3
Riho applied for a home loan five years ago from his then bank, with an interest rate of 1.9% plus six-month Euribor. At the moment the loan balance is 149,874 euros, and the loan is partly covered by an additional guarantee. Riho studied several banks for better conditions and decided in favor of LHV precisely because it received a better margin of 1.75% and the bank was also willing to issue an additional guarantee. For Riho, this very fact has become decisive, since he wants to sell the donated property. The bank did not ask for any additional commission for the refinancing, but had to pay around 200 euros for the valuation report and 375 euros for the notary’s fee. In the future, Riho’s monthly payment will be lower and the second property will be mortgage-free.
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2024-01-17 14:05:44
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