Mortgage Lending – Risk calculation for the home loan

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Overall risk of loan 

Overall risk of loan 

The loan-to-value ratio is primarily based on the market or market value and accordingly only shows the maximum possible loan-to-value ratio. The loan expiration, on the other hand, represents the overall risk of a loan compared to the loan collateral.

If you want to buy or build a property and have little equity, you can expect a long loan term and higher interest rates. This enables the bank to pay the greater risk. If you are considering the idea of ​​such financing, it makes sense to first use a special calculator, such as the house loan calculator from home credit, to calculate the maximum loan amount that is possible at a monthly rate that can be paid.

If a property is mortgaged, the loan expiration clarifies the ratio of all external funding to the maximum possible mortgage loan value of the property.

Home loan quick comparison

Home loan quick comparison

Loan for which the following key data result:

  • Loan amount: 160,000 USD
  • Purchase price: 300,000 USD
  • Security discount: 10% (30,000 USD)
  • Lending value: 270,000 USD

If you now put the loan amount in relation to the mortgage lending value (USD 160,000/USD 270,000), the result is a mortgage lending amount of 59% for the loan. This means that the property is only lent to 59%. The result is that home finance could be increased again if necessary.

Direct influence on the interest rate

Direct influence on the interest rate

Financing viewed. Therefore, he has a direct influence on the interest rate that the bank offers for a required real estate loan. The reason for this arises from the fact that the lower the calculated value, the more attractive the interest rate is. If the calculated value is too high, funding is often rejected.

  • The applicant’s individual overall situation also plays an important role here. If he has an extraordinarily good credit rating, he will receive the loan despite a high loan-to-value ratio.

Most banks set the upper limit for the loan-to-value ratio so high that if a compulsory auction becomes necessary, they at least get back the capital they used. The value is usually a maximum of 60% because the bank assumes that this is sufficient to cover it. In this case one speaks of a real loan. If the value is greater than 60%, the bank can expect to lose some of its money in a foreclosure sale.

 


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