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Wednesday, May 18, 2022

Accessing Mortgage in Different Countries Across the World

Buying a home in America, United Kingdom or Dubai for instance is a completely different process. Homeowners in the UK have become accustomed to the way US purchase a home.

For most US citizens, they save for a deposit, apply for a mortgage, and then spend approximately 30 years paying it back until they own the home.
Whilst there are various types of mortgages available in the US, the home-buying process is always the same unless you have the cash to buy a property outright.
However, there are many countries overseas that have a completely different methods and schemes to adopt when it comes to buying a home.

According to research by Online Mortgage Advisor, below are some countries with alternative ways of getting people onto the property ladder;

1.  Sweden

Mortgage requirements in Sweden are regulated partly through legislation and partly determined by the banks themselves.

In addition to the standard proof of a steady income, Swedish banks use the following calculations to determine how much they’ll lend you:

Left to live on

Banks will calculate how much you’ll have left to live on once your mortgage and other bills are paid.

The usual requirement for a family of four (two adults, two children), is around 23,000 SEK (£1,820) per month.

Mortgage ceiling

Sweden has recently brought in tighter controls, so banks can’t approve mortgages that exceed 85% of the purchase price.

However, in certain cases, it might be possible to get an additional unsecured loan – but a higher interest rate would then be charged and the loan would have to be paid off in a shorter time frame.

Amortization requirements

New loans have to be repaid at the rate of 2% per year until the loan is down to 70% of the property’s value, and then at 1% per year until its reduced to 50%

Loan to income ratios

A maximum mortgage of five times your pre-tax annual income is seen as standard, which is slightly higher than the UK average of 4.5 times your annual income.

2.  Singapore

Singapore has the second most expensive housing market in the world – meaning 80% of the country’s residents live in government-built and subsidised units, such as high-rise flats.

But for those who are able to buy their own house, most banks offer mortgages at fixed or variable rates.

In most cases, the banks will offer loans of up to 60% or 80% of the purchase or valuation price, whichever is lower, and the buyer will then have to top up the remaining amount in cash from a Central Provident Fund account.

Buyers in Singapore will also have to factor in the Total Debt Servicing Ratio, which limits the monthly debt obligations to 60% of a salaried person’s income.

This goes up to 70% for self-employed or commission-based workers, including debts incurred from credit cards or car/property loans.

Interest rates can often work in the favour of the borrower in Singapore, so getting a mortgage pegged to a variable rate might be more beneficial – as some of the variable mortgage options are based on the rate that Singapore banks exchange money with each other, which tends to be a more resilient option.

mortgage, US,
AIHS 2022

3.  Canada

Similarly to Sweden, Canada has interest rates that are secured for five years on average, and the max loan term is only 10 years.

However, interest rates are much lower in Canada, for example a fixed term-mortgage can be only 2.49%.

At the end of the period, the mortgage terms are then renegotiated.

4.  France

The general rule of thumb in France is that you can borrow five times your individual or combined income for a repayment mortgage.

When it comes to interest-only mortgages, you can borrow 10 times your income.

However, in France you must have net assets outside of your main residence which equal at least the value of the interest-only mortgage.

For example, if you want to borrow €1million through an interest-only mortgage, you’ll need to have at least that amount stored away somewhere.

The main thing considered when someone wants to take out a mortgage in France is the debt-to-income ratio, and it’s the main thing that can derail the property dreams of even the richest person.

Banks will look to see if your existing monthly payments for loans and mortgages exceed one third of your gross monthly income.

However, one outgoing that French banks don’t take into consideration is school fees.

So, if you have two children in private education, the term fees for the school will not be reviewed in your outgoings.

5.  South Africa

Generally speaking, to secure a mortgage in South Africa you’ll need a minimum deposit of 50% of the property’s purchase price.

This reflects that the maximum loan-to-value available is currently 50% of the purchase price or valuation, whichever is lower.

Although lenders offer a choice of either fixed or variable interest rates, most mortgage lenders in South Africa opt for a home loan on a variable-rate basis, with a maximum of 30 years available.

Fixed rates are much less common due to the noncompetitive rates offered by banks to offset the risk of volatile interest rates.

Whichever mortgage type you choose, a loan in this country will generally have to be paid off by the age of 70.

6.  United Arab Emirates

The UAE mortgage market is well-established, with international and local lenders offering home loans.

Both residential and buy-to-let mortgages are available, although their criteria may vary.

If you’re taking out a loan to buy a property in the UAE, you’ll typically need a deposit of at least 25% for a property worth up to AED 5 million.

More expensive properties will require a deposit of at least 35%.

Borrowing is capped in the UAE, so the amount you’re borrowing cannot be more than your total anticipated earnings for the next seven years and, in Dubai, mortgage payments are capped at 50% of your monthly income.

7.  USA

The mortgage market in the USA is very well developed, but it operates slightly differently to how it does in Europe.

In America, a key calculation used in the mortgage application is the debt-to-income ratio, which will establish whether you can maintain the mortgage repayments along with your existing loans.

This must not exceed 50% of your gross monthly income, so some lenders will be looking for very detailed information about your financial status.

Mortgages are available in the US for up to 75% of the property’s value, with most of them being on a repayment basis, with the maximum term being 30 years

Interest rate and loan terms vary depending on location and property type.

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