Possible consequences of requesting a mortgage for more than 80
We tell you what the possible consequences are of requesting a mortgage for more than 80% to buy a home.
Taking out a mortgage for more than 80% of the purchase of a house has always been a risky operation. Mainly, because the debt contracted with the bank is greater, which increases the danger of not being able to pay the monthly payments of the loan if an economic mishap occurs.
In recent years, however, this risk has been significantly reduced. Since the mortgages had very low interests, clients could pay very affordable installments, even if the bank lent them up to 90% or 100% of what the home cost them. Consequently, many entities relaxed their approval criteria and began to finance more than 80% of the purchase to applicants who presented a solvent profile.
If a person with little savings wants to apply for a mortgage loan, it is very important that they weigh all the dangers before processing their application.
Higher fees as a consequence
The first thing to keep in mind is that returning a mortgage of more than 80% it costs more money. Logically, if the bank lends a larger amount, the fees the client will pay will be more expensive. With an example it is easier to see it: suppose that a person wants to buy a home for 100,000 euros and takes out a loan with a term of 25 years and an average interest of 2%. If the entity finances 80% of the price (80,000 euros), the monthly payments will be 339 euros. On the other hand, if it covers 100% of the acquisition (100,000 euros), the fees will rise to 424 euros.
For this reason, anyone interested in taking out a mortgage of more than 80% must ensure that they can afford these higher payments. It is essential that the monthly payments on all your credits, including the mortgage, do not exceed 35% of your net monthly income. Likewise, the client must have a stable job that allows them to meet their loan payments throughout the repayment period.
The price of the house may fall below the price at which you bought
Another aspect that must be kept in mind is the evolution of housing prices. After several months of significant increases, it seems that the cost of houses and apartments is beginning to stabilize. The forecast, furthermore, is that mortgages will continue to become more expensive in the coming years, which may reduce the number of sales (there will be fewer people who can afford to purchase a home) and may force sellers to lower their financial claims.
That is, if a person buys a house today, it is possible that it will be worth less money in a few years. And that can cause problems if you took out a mortgage to finance more than 80% of the operation. For example, if you want to sell the home in the near future, you may not be able to pay off the loan with the profit from the sale. And if you cannot pay the installments and the bank auctions the house to recover the money, it is possible that there is still outstanding debt after the seizure, so the entity could seize the rest of your present and future assets (your accounts, part of your salary...).
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Few banks give mortgages for more than 80% of the purchase value
Banks are also aware that granting a mortgage of more than 80% is riskier now than it was a few years ago. For this reason, the vast majority do not offer these products, at least openly. Even so, if the client's financial situation is good, they can still find financial companies willing to lend them up to 90% or even 100% of the price of their future home.
If you need a mortgage for more than 80%, you should keep in mind that most banks do not grant this type of mortgage, and if they do, they are only for high profiles such as civil servants or people with incomes greater than €2,500 per month.
You also have to take into account that the bank will require a higher interest rate, more links and worse conditions.
It is recommended that you hire the services of a mortgage professional who will help you filter all the offers on the market and get you the mortgage for more than 80% in the best conditions.
At Valoracasa Inmobiliaria we process your mortgage for free if you buy with us.
Juan Rosado
CEO
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