3 ms·

I don't know what it's like in the US, but in Sweden you can get a much better deal on your mortgage if you only have to borrow 80% of the cost of the house tha

by dagw 7y ago

I don't know what it's like in the US, but in Sweden you can get a much better deal on your mortgage if you only have to borrow 80% of the cost of the house than if you have to borrow 95+%, even when borrowing the same amount. If you have a good job and can afford $1500/month but don't have any savings to use as a down payment on a house you're not going to able to get as nice a place buying as you will renting.

jbarberu 7y ago
They recently changed the lower limit of the down payment to 15% in Sweden. But yes, you'll generally get a better interest rate if you put more of your own money into the purchase. As a Swede in the middle of buying a house in the U.S. I have to say it's surprisingly similar. The big differences between Sweden and the U.S. is the loan terms. Here in the U.S. the terms are extremely long, you'll typically get 10, 15 or 30 years with a locked interest rate. In Sweden you'd normally lock your rate for 1-5 years up to 10 years depending on your financial situation. When I owned a condo in Sweden I went for 1 year locked rate and then month-to-month once that first year passed. What you have instead of a fixed term is a fixed amortization. By law you have to pay back 2%/year until your principle is down to 70%, 1% until it's down to 50% and after that you can just pay interest if that's what you want to do.
eridan2 7y ago
There are many places where you can't borrow 95% of the cost, or you can only with additional guarantees
yardie 7y ago
It’s similar in the US. If contributing less then 20% you have to pay PMI (mortgage insurance). This may add a few $100s per month to your payment but in no way contributes to the principal. It works against you in other ways because it limits your upper price limit as banks want your payments to be within 30% of your AGI
ZeroFries 7y ago
The math might not work out as poorly as you imagine. I don't know the exact numbers for Sweden, but in Canada (where insurance is required for downpayment less than 20%), putting 5% is actually not a bad move, even if you have 20% down ready, because, similar to the arguments for rent, you can invest the difference and make similar returns to the extra costs for the mortgage.

by dagw 7y ago

jbarberu 7y ago

They recently changed the lower limit of the down payment to 15% in Sweden. But yes, you'll generally get a better interest rate if you put more of your own money into the purchase. As a Swede in the middle of buying a house in the U.S. I have to say it's surprisingly similar. The big differences between Sweden and the U.S. is the loan terms. Here in the U.S. the terms are extremely long, you'll typically get 10, 15 or 30 years with a locked interest rate. In Sweden you'd normally lock your rate for 1-5 years up to 10 years depending on your financial situation. When I owned a condo in Sweden I went for 1 year locked rate and then month-to-month once that first year passed. What you have instead of a fixed term is a fixed amortization. By law you have to pay back 2%/year until your principle is down to 70%, 1% until it's down to 50% and after that you can just pay interest if that's what you want to do.

eridan2 7y ago

There are many places where you can't borrow 95% of the cost, or you can only with additional guarantees

yardie 7y ago

It’s similar in the US. If contributing less then 20% you have to pay PMI (mortgage insurance). This may add a few $100s per month to your payment but in no way contributes to the principal. It works against you in other ways because it limits your upper price limit as banks want your payments to be within 30% of your AGI

ZeroFries 7y ago

The math might not work out as poorly as you imagine. I don't know the exact numbers for Sweden, but in Canada (where insurance is required for downpayment less than 20%), putting 5% is actually not a bad move, even if you have 20% down ready, because, similar to the arguments for rent, you can invest the difference and make similar returns to the extra costs for the mortgage.